Blockchain technology in the RegTech industry can be implemented in a cross-sector application where the primary function is supplemented by secondary effects such as compliance with monitoring obligations regarding automation and de-bureaucratization.
FREMONT, CA: The Regulatory Technology (RegTech) in financial services encompasses digital services on big data, biometrics, artificial intelligence, and machine learning to comply with regulatory requirements more effectively. And this industry is projected to cross $127 billion per year by 2024.
Blockchain offers many advantages that help boost RegTech evolution. It allows transparency because of its improved security via cryptography, distributed ledger, enhanced record-keeping, and faster and cost-effective through automation.
Here some uses of blockchain technology in the RegTec industry:
Regulatory Fund Management
Smart contracts offer a significant advantage because of automation and the ability to incorporate the essential aspects of regulatory reporting and comply with a fund's regulatory norms in real-time.
The vast amount of information collected by big data can create a collection of unstructured data that have no use. RegTech companies implement blockchain technology to address this issue by producing data that is transparent and using a distributed ledger to make it obtainable for internal use, protect from frauds, and document for audit purposes.
Anti-Money Laundering, Client Onboarding, and Fraud Prevention
Anti-Money Laundering (AML) and Know Your Customer (KYC) regulations for onboarding clients can be challenging for financial institutions as they need to gather their data on possible clients before they begin doing business. Also, they need to update the data regularly for existing counterparties, which is expensive and can take a lot of time. Banks can implement universal ledgers to distinguish their customers, track transactions, and identify fraud.
Many RegTech companies offer cryptocurrency firms solutions to help authenticate identity quickly and cost-effectively build on improved data analytics or biometrics in compliance with comprehensive regulations.
Monitoring transactions increases the transparency that blockchain offers because of the growing use of virtual currencies for money laundering. Additionally, it provides better traceability and quicker analysis when assets are digitalized.