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Opinion

Regulation: The benefits of blockchain

Banks are suddenly obsessed with potential of the distributed ledger in financial markets, but regulators must make sure it is used in ways that remove collusion and wrongdoing.

From the IMF/World Bank meetings in Lima to the Sibos conference in Singapore and at every banking industry meeting in between, one surprise topic has emerged at the very top of the agenda across financial services. It is not the slowdown in China, the worrying outlook for global growth, or the signs of mal-investment fuelled by quantitative easing from developed world central banks now unfolding in an emerging market financial meltdown that has bankers enthralled.

Rather it is the potential of the blockchain technology underpinning the cryptocurrency bitcoin to transform the global payments and financial market infrastructure – and to disrupt the centuries-old role as central intermediaries and repositories of trust within the financial system of the banks themselves.

Euromoney reports in detail this month on how banks are grappling with the potentially transformative application of this technology.

It comes to something when leading central bankers discuss this technology almost matter-of-factly in terms of its potential role in issuing currency and conducting monetary policy. In a speech in September, Andy Haldane, chief economist of the Bank of England, raised the blockchain and digital currency’s potential role in enabling negative interest rates.

Haldane argues it is now clear that the distributed payment technology embodied in bitcoin has important potential.

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