Another area where the blockchain technology can be useful is trade finance. This has traditionally been a paper-intensive process but it is possible to use blockchain technology to digitise and authenticate the records. This can result in trade transactions that are secure with digital records of related data visible to various participants in the trade transaction.
Role of the regulator
Regulators are starting to acknowledge, and even embrace, the revolutionary potential of the blockchain and other digital innovations. In the UK, the Bank of England's judgment that "the impact of the distributed ledger could be much wider than payments" shows that these technologies may likely move into the mainstream.
The Monetary Authority of Singapore also signaled their intention to encourage banks to consider the many applications of the blockchain in the financial sector where distributed ledger systems may potentially be "applied in any area which involves contracts or transactions that currently rely on trusted third parties for verification".
Many of these new technologies started off seeking to disintermediate banks, but the trend is now shifting towards collaboration. Partnerships between banks, technology companies and regulators will bring benefits to consumers and the financial system.
Whether cryptocurrencies, the likes of Bitcoin, will fail or succeed remains to be seen. But if they do take off, it is not impossible to imagine a scenario where even the central banks themselves might look at issuing digital currencies. No bank can afford to ignore what it augurs for the ongoing avalanche of digital innovations to come.
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