UN Commission: Blockchain Can Help Struggling Banks in Latin America
A regional UN Commission in South America has suggested in a new report stating that Blockchain could one day help solve problems for developing market banks.
The Economic Commission for Latin America and the Caribbean (ECLAC) has stated Blockchain could help improve costs in troubled banking sectors.
In a report released at the end of April, the ECLAC, which is a regional commission of the United Nations, said the technology held particular promise in reducing so-called “de-risking” practices among local banks.
De-risking, it says, is the phenomenon witnessed across the developing world in which banks shy away from deals which would cost too much in regulatory maneuvering to fulfill.
“...This technology appears to have the potential to address the problem of de-risking on two fronts,” it said.
“First, an appropriately designed Blockchain-based settlement network would offer tools to improve surveillance of transactions, which would enable the detection of illicit financial transfers and thereby decrease risk and associated compliance costs.”
“Second, a Blockchain-based network would offer Caribbean banks the opportunity to bypass correspondent banks altogether, thereby reducing transaction costs and increasing efficiency.”
The report continues to delve into three models of Blockchain solutions available to potentially assist, these being open, permissioned and centralized.
A large proviso nonetheless comes in the form of its conclusion, which states Blockchain in its current form “is not ready” to fully deliver.
“Blockchain-based payment frameworks are nascent technology that is not ready to address these problems today,” the ECLAC writes.
“In the long term, however, they have the potential to support a robust monitoring component that would relieve de-risking pressure by reducing compliance costs for correspondent banks.”