The EconoTimes reports that Janet Yellen has the Fed monitoring how blockchain may impact transactional and ownership solutions, yet she does not mention regulatory monitoring:
“Speaking at the Commonwealth Club, San Francisco, California on January 18, Yellen made the remarks during the Q&A round which followed her speech on ‘The Goals of Monetary Policy and How We Pursue Them’.
Yellen said that blockchain is ‘a technology that enables transactions and ownership of things to be taken care of automatically, without a need, for example, for a trusted central party to record transactions. So, it is very important new technology that could have implications for the way in which transactions are handled throughout the financial system.
We’re looking at it in terms of its promise in some of the technologies that we use ourselves and many financial institutions are looking at it. It could make a big difference to the way in which transactions are cleared and settled in the global economy.’ ”
The solution that is most aligned with the strengths and weaknesses of blockchain technology and the solution that would significantly lower the burden on banks is associated with regulatory reporting practices. Every bank must analyze every transaction and report suspicious activity. Instead of creating a SAR and then sending that to the Fed, banks could simply update a blockchain that provides a shared document. Because the Fed could mandate the infrastructure and the format, such a solution could be quickly deployed. Because the records are rarely modified and are primarily read only, the solution nicely avoids known technological limitations of blockchain technology while leveraging the privacy and security aspects.
It would be valuable to blockchain evangelists to evaluate different potential blockchain configurations (nodes at regional Fed offices, at each major bank, at all banks, etc.) and determine how each configuration impacts operational costs compared to today’s solution and how each configuration would redistribute costs across the participants.
Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group
Read the full story here