In any financial industry around the globe, there are number of different processes. These processes need to be executed by abiding to rules and regulations in order get a desired output with minimum malfunctions. Such processes are known as regulatory processes. Regtech is simply the management of these regulatory processes using technology. Regtech makes use of modern technology like Artificial intelligence, Big data, Data mining to provide easy, cost effective and reliable regulatory solutions. Regtech has become an important aspect in the finance domain as the extent of regulations is rising with more focus on data and reporting. Using technology, Regtech is automating the processes which were first executed manually
Blockchains are basically list of records which keep growing. These records are known as blocks and they are connected to each other using cryptography. A cryptographic hash of previous block in present in the current block. Today blockchains are used in multiple areas. It is used as a distributed ledger for cryptocurrencies, mostly for bitcoins. Financial services are using blockchains are distributed ledgers in banks. It speeds up back office settlements systems, increases efficiency and reduces costs. It is also used in supply chains and video games.
Today blockchain is still in its initial stage. The industry is waiting for further blockchain disruption especially around use of technology to manage regulations. Financial service providers are searching for solutions that can help their compliances in the regulated environment where they need to be well equipped with technology to adapt to new changes in the fund governance. Today all the global financial regulators are showing interest in using blockchain technology in the regtech ecosystem. However, they do not have an adequate knowledge of the technology. The Financial Conduct Authority has come up with a very nice initiative. They have developed a ‘sandbox’ in which the start-ups of Fintech and Regtech domain can experiment with the technology without worrying about regulatory infringement. For this the systems need to run parallel.
As mentioned above, blockchains are used effectively as distributed ledgers for banks. A distributed ledger is an advantage database that can be shared over a system of various locales, topographies and foundations.
One key component of blockchain innovation is that a disseminated database just permits to ‘add’ activities not ‘revise’ or ‘erase’. All members inside the system can be ensured to have an identical duplicate of the ledger. The essential target of blockchain based applications is to set up a mutual wellspring of truth for all actors on the system regardless of whether they have clashing agendas. One incredible result of this is disintermediation — by expelling the entity in the middle, quicker conveyance, upgraded trust, a lower cost for every exchange, a superior client experience and improved primary concern is attainable.
In future, once this technology receives an impetus, it is going to play a major role in compliance, regulations and finance services.