Blockchain Opportunities in the Financial Sector
Blockchain is more than Bitcoin and digital JPEGS (NFTs). It is a smart technology that can work for the entire financial market. Emanuele Francioni is the founder of Dusk Network, and sees blockchain beginning to be seriously picked up in Europe. "The digitization of financial markets is irreversible”..
Blockchain is more than Bitcoin and nice digital JPEGS (NFTs). It is a smart technology that can work for the entire financial market. Emanuele Francioni is the founder of Dusk Network, and sees blockchain gaining traction in Europe. "The digitization of financial markets is irreversible”.
Blockchain is a serious business. With Dusk we are creating an open-source blockchain for financial applications. Customers can use it to easily issue, maintain and trade stocks, bonds and private equity.
Dusk started in 2018 because of the incredible opportunity to innovate a sector where processes and systems are often unnecessarily complex. Considering the many requests for launching pilots together with institutions such as banks, custodian organizations and trading platforms, it feels that such an opportunity is finally picking up steam within the established financial world too. There is a heightened awareness that this technology can work to the advantage of institutions, even those that haven’t been that forward-looking or open-minded in the past .
Outdated systems
The current financial infrastructure is in need of innovation, Francioni says "Often multiple intermediaries are needed to process something administratively. A good example is keeping records of shareholder registers. With every trade you have to go to a notary who, after everything has been passed, manually updates the shareholder register. A time-consuming job and on top of that you pay a lot of money for it. The administration at large custody companies may go digital, but even here the processes are often needlessly complex and dependent on multiple intermediaries who have to keep and submit their own records. For example, it can take up to two days for a transaction on a trading platform to be processed in all administrations." These are all processes that can be perfectly digitized "You can process transactions on a blockchain in real time, and on our blockchain these transactions are also immediately final. You thereby remove a lot of administrative hassle and you take out all kinds of parties. It becomes faster, cheaper and often safer."
There is only one truth
It is important that the preconditions that are important to financial institutions are included in the design. A big advantage of blockchain is that there is only one truth. In the 'old' infrastructure there can be times when administrations do not match and that is undesirable. For example, at any given time there is a clear overview of who owns which shares. This can greatly simplify the implementation of seemingly simple business processes
Think of sending out dividends to the right people or accomplishing an official vote. Through our blockchain you can immediately retrieve who is entitled to what, without having to involve all kinds of intermediaries and companies. In existing blockchain solutions, all data is publicly available, and that can cause problems especially in regulated markets. That's why our blockchain is set up so that wallets, transactions and personal data are protected, but can be retrieved from official agencies. That means information about your assets and transactions are safe, but institutions can still fulfill their information obligations. Also, our 'smart contracts' offer the possibility of imposing certain conditions on financial instruments, making it easier to comply with local regulations.
Europe is on board
At Dusk Network, they see that the shift to blockchain is now increasingly supported by Europe. MiCA, Markets in Crypto Assets Regulation, for example, is an EU initiative that classifies digital instruments in a regulated framework. MiCA defines, for example, the conditions that digital money issued on a blockchain must meet to serve as a secure product.
In addition, a pilot scheme will start in 2023 in which large regulated trading platforms and custody companies will be allowed to adopt blockchain technology for full tokenization. "The scheme will allow these parties to apply for an exemption from a good number of 'restrictive' obligations. A huge boost for blockchain adoption in the industry, as they can immediately enjoy the benefits in their own systems." - says Francioni.
Francioni sees that the transition to blockchain technology in financial markets is now irreversible "We believe the world is currently in a transition phase to a fully digitized economy. That transition is now also being reinforced from Europe. I am proud that we play a fundamental role in this and can help our clients take the first step."