With an increased need for compliance and regulations in the face of growing risk of hacks, fraud, and mismanagement, many companies have turned to the RegTech industry for solutions, as well as blockchain which is currently shaping it.
Proclaimed by many industry experts as one of the top sector’s companies should pay attention to, Regulation Technology (RegTech) has seen immense growth during the past half decade. Rising in the midst of a string of large-scale breaches and leaks from multinational companies, the industry provides solutions to businesses in the form of technology that facilitates the delivery of regulatory requirements in a secure, easy and cost-effective way.
For the longest time, a majority of companies across the globe did not pay any attention to the data protection of themselves or their customers. The level of risk management they employed was no better than leaving your front door unlocked at night. In light of this, it was to no one’s surprise that hackers began targeting these companies and stealing their information.
Since then, businesses have increasing had to follow a range of strict regulatory standards depending on what industry they are in and kinds of data they handle. These measures, however, can be strenuous on companies and take up much time and resources, such as hiring new staff and upgrading infrastructure, just to keep up. This includes the fact that new regulatory requirements are steadily becoming more technology-based, forcing businesses to look into going fully digital.
Considering all the troubles associated with compliance, many companies have been seeking solutions in RegTech to streamline the process. One of these solutions is blockchain.
Currently, for some companies, they are still burdened with traditional and sluggish processes when handling administrative and regulatory work. This comes in the form of heavy paperwork that needs to be worked on and processed by several internal and external stakeholders. No matter how you look at it, this is costly and inefficient. In this regard, blockchain reduces the reliance on such methods, by forcing a switch to digital and auditable workflows. At the same time, by combining the digital capabilities of blockchain and cloud hosting, companies will steadily phase out traditional paperwork and other antiquated processes.
Following this thought, as documents shift towards a cloud-enabled blockchain, companies and institutions will be able to better store, track and retrieve data as well. Businesses in the financial industry will particularly benefit from this as transaction data flows back and forth on a regular basis. By utilizing a private blockchain, a company will own the entirety of information involving a deal and subsequently, the investment bank on the transaction will have a consolidated location to find, in real-time, ownership of key files. At the same time, using blockchain for document tracking will streamline deals and allow for the necessary level of transparency for regulatory compliance.
Most importantly, however, is that blockchain provides enhanced security. Blockchain by nature is secure due to how a piece of data is stored. As a ledger of information that is distributed across a network, blockchain eliminates the risk of having a single point of failure. A hacker will need to attack countless machines at once to gain even a tiny bit of data and put them together. All in all, it is simply not possible. Blockchain’s decentralization also ensures that even if one of the points in the network fails, key data remains secure elsewhere.
Looking forward, we can expect RegTech which is being led by blockchain to incorporate algorithms and analytics to completely remodel the regulatory space. This includes leveraging AI and machine learning to streamline anti-money laundering and Know Your Customer. This all points towards an exciting future for RegTech and blockchain, carrying with it plenty of opportunities for those interested.
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