Financial industries and systems use many processes to carry out essential tasks. These processes must follow rules and regulations in a system to get the needed output with as few malfunctions and interruptions as possible. These are termed regulatory processes. Regtech refers to the management of these processes with the help of technology. RegTech is harnessing the power of tools like Big Data, AI and data mining to streamline and provide reliable and cost-effective solutions.
Blockchain refers to lists of records which are saved in blocks. These blocks connect to each other using cryptography and connected by hashes. Blockchains are currently being used in many areas and as a distributed ledger for many cryptocurrencies. Financial services companies use blockchain regularly in banking to speed up accounts settlements. Blockchain use is being used to speed up supply chains and video games.
If you wonder about blockchain’s importance in the RegTech system – here is how. Blockchain is an important driver of the RegTech solution due to the many benefits offered. Decentralization, better transparency and cost-effective process thanks to automation are the major reasons. Most important of all, enhanced cryptographic security.
Since blockchain has already brought about important changes by disruption, regulators are looking at ways to help financial institutions tackle anti-money laundering activities while promoting KYC regulations. Data verification is handled easily thanks to blockchain which has a big impact on anti-money laundering activity by adding another layer of authentication, data sharing and risk mitigation. RegTech providers are also able to monitor transactions in real time thanks to blockchain technology. Protection from hackers is another concern for financial institutions and work to make these technologies work more seamlessly.