As banks work on their own proprietary blockchain solutions after initial resistance, what does that mean for business and banking moving forward?

Regulation and Decentralization

The banking industry is one of the most highly regulated all around the world. The requirements for reporting, auditing and compliance are considerable, adding cost and complexity to the industry. Blockchain-based cryptocurrency solutions sidestepped that regulation, at least initially.

But blockchain wasn’t created simply to sidestep regulation:

It takes control away from central authorities (banks, corporations, and governments) and puts that control back into the hands of the people who use the systems.

Its transparent, open-source nature and consensus architecture mean that less regulation will be necessary altogether.

As banks realized that this transparency and public trust could lower their compliance costs, they became interested in blockchain technology in banking. Now banks all around the world are embracing blockchain as well.

Blockchain and the Swift System

Most electronic bank transfers are done using an antiquated system called Swift. The Society for Worldwide Interbank Financial Telecommunication was founded in 1973 to create standards for interbank communication. The need for interoperability between different banks around the world is filled by the system, but high-profile theft and fraud has occurred on the system, and transactions are slow and unreliable overall.

Many banks see blockchain as a better alternative to Swift, creating much faster, more secure and certainly more transparent transactions. Blockchain in the banking industry can dramatically improve the efficiency and security of global transfers.