Importance of RegTech in Blockchain
The world of Blockchain undoubtedly had a year of ups and downs within the market – making it uncertain for the future in 2023. One of the most popular uses of blockchain is used for cryptocurrencies, helping the verification and traceability of multistep transactions.
We saw cryptocurrency lose over $2 trillion in 2022, falling far below the highs that we saw in 2021.
Crypto is a highly volatile asset, with unpredictable price fluctuations and falls. The current state has led to 60% of Americans believing that investing in digital currency is extremely risky.
Can the relationship between digital currencies and consumers be amended? We think yes, but it’s going to take some time to reassure consumers that their investments are safe.
This is where RegTech in Blockchain comes in.
What is RegTech?
RegTech is the management of regulation, compliance, reporting and monitoring through technologies like big data, data mining, artificial intelligence and blockchain to provide robust, reliable and effective solutions. Due to the global financial crisis, regulators started focusing more on the compliance element in the business. This resulted in thousands of rules and provisions being introduced all around the world.
How Does this Work in Blockchain?
Blockchain is a decentralized distributed ledger, using blocks that contains the records of transactions stored using cryptography. Aside from payments, it allows banks to streamline complex procedures and improve internal processes.
This is mostly used in cryptocurrencies, and can ensure transparency of operations, offering cross-border transactions in real-time, and enabling faster processing of payments. Using blockchain, a system that provides real-time access to data, can save the time and labor required to confirm transactions and complete complex procedures.
Blockchain x RegTech Ecosystem
Blockchain is essential within the RegTech ecosystem, allowing for increased translucency, decentralization, briskly and more cost-effective processing through automation and enhanced security through cryptography. As more RegTech companies are uniting with financial institutions and regulatory bodies, their establishment has become more crucial than ever in the Blockchain ecosystem.
By complying with laws and regulations, RegTech has helped companies save time and capital for banks.
The Key Areas for Blockchain in RegTech
Financial regulators look for the most cost-effective solutions to help banks and financial institutions comply with rules. Blockchain is disrupting how so many do business due to its flexibility in the market.
So, what will the Blockchain x RegTech ecosystem bring to the FinTech world in 2023?
AML and KYC
Anti-Money Laundering (AML) and Know Your Customer (KYC) need collecting customer data for their compliance procedures. Blockchain applications already provide AML software in the cryptocurrency space where all KYC is handled efficiently and cost-effectively.
KYC has had a slower adaptation to using blockchain in their services but could help verify the identity of a politically exposed person through biometrics analytics and social media analytics.
RegTech providers monitor the clients’ transactions in real-time. Through Machine Learning and AI technologies, these companies can observe behavior of clients and send alerts if any suspicious activity is found.
We’ve seen these tools used in financial services and crypto exchanges, even using forensics tools to track Bitcoin terrorist funding.
One of the biggest concerns from financial institutions is the inability to protect their customers’ data. Blockchain has been able to assist with this – sending the most up-to-date information to banks each time a KYC transaction occurs.
This can help provide authorities with better knowledge on how KYC information is applied, and overall bring a better experience to customers.
Blockchain in 2023
Despite a rough year for cryptocurrency, blockchain has the potential to become a universal and integral ledger in the FinTech world. With the utilization of this in RegTech, we’re anticipating many of these changes being used in 2023.
How Storm2 Can Help
As a specialized recruiter in connecting FinTech talent with disruptive FinTechs, we work with the most innovative Blockchain companies worldwide and a deep database of candidates from the blockchain background. If you’re a blockchain FinTech looking to hire a blockchain specialist to grow your team, we have specialized candidates ready for you to connect with. Get in touch with us now.