Blockchain-Based Compliance

Blockchain-Based Compliance: Financial Sector’s Dream or Nightmare?

There is a plethora of articles praising the impending advent of blockchain-based regulatory compliance as a new standard for the financial services industry, expounding how the distributed ledger will save tons of time, money and effort to businesses and watchdogs alike.

Beyond any doubt, there are numerous benefits to blockchain technology being used in the regulatory compliance realm.

It will fetch watchdogs’ real-time regulatory oversight, proof of process and immutable records, making it easier to avert fraud and deception. If we take the notorious Bernie Madoff’s Ponzi scheme as an example, the $20 billion damage to investors would have been avoided had a clear – and immutable – record of immutable facts and figures been in place.

Firms will benefit too, especially when it comes to time – and resource -consuming KYC and AML processes related to taking on new clients. As Sam Mire in his article for the Disruptor Daily notes:  “With blockchain, the future of onboarding seems much simpler. With a database of verified client data in existence, secured and shareable among different institutions, the time it currently takes to collect and authenticate data would be reduced significantly…”

Blockchain-based compliance, if universally and properly implemented, is supposed to make the financial services sector super-transparent and even more tightly controlled.


For adherents of this Orwellian, transparency-centric religion that reigns the financial business of today – perhaps perfect.

But, not so perfect for market participants who will be deprived of the remaining leeway in operating their businesses, nor for their clients whose smallest financial transactions will become immediately known to an unspecified number of “different institutions“.

It is indisputable that the progress of blockchain technology will result in faster, more efficient and broader implementation in the regulatory compliance area.  It is paramount to find an approach that will preserve discretion and flexibility that have been characteristic of the financial services sector since its very origin.