European Banking Authority Points To Unreliable DLT Laws
The European Banking Authority recently released a report exploring the impact of untrustworthy ledger technology on traditional finance, stressing on two specific instances in which banks utilize the new-found technology for their services: international trading and thoroughly verifying identification documents.
In the report, the EBA says that brand-new technology is constantly developing and can potentially solve many issues relating to international trade, also known as cross-border finance. For example, blockchain technology can positively affect international trade by cutting down on costs and risks of fraud.
An overall increased efficiency through digital or smart contracts will also provide much faster and secure transactions.
An additional note on the report explained that disturbed ledger technology can eventually provide a faster, stronger and more efficient method of identification verification as data and information regarding transactions and clients can be shared between banks operating on one network.
While DLT provides many benefits to the global financial industry, there are just as many risks exist associated with its uses. In regards to cross-border trade, regulations around the world are not all the same. Different jurisdictions operate under different laws and regulations, potentially causing a conflict of interest between two trading countries.
As the EBA explains, a smart contract between two businesses in different areas of operation may not abide by all the laws and regulations placed by each corresponding end, rendering the contract useless until an agreement can be achieved. According to the authority, a number of banks operating within Europe utilized a shared digital framework to conduct a series of cross-border trades, proving the efficiency behind DLT when used mutually.