EBA Studies Blockchain Technology’s Effect on Banks
One of the leading regulation and finance authorities in Europe, the EBA, has issued several warnings towards banks regarding business risks associated with blockchain technology, and how Fintech impacts various businesses.
The research done by the EBA looked into the risks behind financial trading and the procedures it entails to ensure that all processes are properly executed. The authority has pointed out several key factors which raise concerns regarding the new-age technology, such as the several legality issues associated with blockchain technology on a global scale, and the extreme dependency on ISP companies.
Multiple warnings have been issued to banks across Europe, cautioning them against financial technology due to the known and unknown risks towards modern financial entities. As DLT is fairly new, the study highlights two key points regarding risks associated with the tech, its smart contracts and the direct effect it has on customer due-diligence, or CDD.
Although these transactions are fairly consistent, efficient and severely reduce the time it takes to process them, concerns surrounding proper regulations and laws are a factor, including the difficulty governments face in creating a thoroughly designed regulation system for cryptocurrencies.
The EBA continues to explains known risks such as money-laundering and attempts at fraud given the more anonymous nature surrounding digital currency transactions on any framework, stating that the technology could potentially result in terrorist and criminal funding activities due to fewer requirements for physical verification.
While many abuse the added bonus of choosing to remain anonymous and continue to pursue illegal activities, this factor alone proves to be a huge issue for blockchain technology.
While several regulations have already been implemented as counter-measures to such crimes, government and high court intervention is not yet enough to completely ensure and eliminate all malicious attempts on framework technology.
Another rising concern is personal verification of a customer’s personal information. While many bank transactions and negotiations require a customer to be present in person, all processes on a framework can be made remotely without the physical presence of a party involved.