Distributed ledger technology
Distributed ledger technology (DLT), also known as blockchain, offers the financial industry numerous opportunities in the form of promising use cases for developing new business models and increasing the efficiency of their existing activities.
Greater control over your own data thanks to DLT
DLT works rather like a network of many digital notaries that check and verify all transactions in a public transaction register. Once verified, identical copies of the transaction records are stored in multiple databases (i.e. “distributed”). DLT thus makes it possible to transfer and manage not only information, but also assets and their ownership directly between different parties via the Internet. The technology promises significant advantages: it functions without intermediaries, and distribution ensures better protection against external attacks. Because the individual records are interconnected, it is very difficult to manipulate them after the fact.
Taking advantage of opportunities – overcoming challenges
Using DLT offers new opportunities for both banks and their customers. For example, it reduces the cost of identifying customers. Customer data are available more quickly, which makes authentication more efficient.
Another opportunity is the tokenisation of assets, a process whereby rights pertaining to an asset are converted into a digital “token”. DLT plays an important role in this process, offering decisive advantages over traditional asset securitisation, such as greater transparency, efficiency and security for all parties in the ecosystem.
Established intermediaries and their existing business models are facing fundamental challenges as a result of DLT. They must harness their financial expertise, their broad customer base and the significant trust that they enjoy.
A wide range of issues need to be clarified from the regulatory perspective, including the legal classification of cryptocurrencies, how they are taxed and the technical security and legal requirements for storing keys.
Position of the Swiss Bankers Association