How can blockchain and RegTech complement each other?

30. September 2022
In the international finance and compliance industry, regulatory technologies, also known as RegTechs, and blockchain are debated again and again. But what exactly is RegTech and how can blockchain and RegTech complement each other?

The term “RegTech” is made up of the terms “Regulatory” and “Technology” and is defined as a sub-area of the FinTech industry.

RegTech accelerates the digital transformation of risk management and compliance in banks. It is well known that financial institutions currently have to deal with massive upheavals in their market and are exposed to new technologies and competitors. At the same time, the regulation of their activities continues to be tightened significantly.

Due to the rapidly increasing regulation over the last 10 years (e.g. SFTR or EMIR), the financial sector is facing enormous challenges. Regulatory adjustments to business processes and the very heterogeneous IT architectures in banks cost a lot of time and money.

However, risk management and compliance can be accomplished much more cost-effectively using new technologies. Because RegTech applications offer solutions in the areas of risk assessment, risk reporting, reporting, data management, or regulatory screening.

As a subset of FinTech, RegTech solutions have not yet found the same distribution as FinTech. This is surprising since there is a lot of potential for cost savings on the one hand and quality improvements in risk management and compliance on the other.

But how can blockchain help improve regulatory compliance?

In summary, blockchain technology has the potential to improve regulatory compliance. Because it is able to eliminate manual audits by centralizing records. This type of transparency allows regulators to monitor the market and prevent wrongdoing while improving the efficiency of processes.
The blockchain can achieve this by connecting all fronts at once. This helps support transactions, records, and communications between businesses and customers to improve efficiency, security, and consensus.

It can also automate auditing processes by decentralizing information through network-integrated validation services.

Therefore blockchain can help improve compliance, among other things, as it provides a secure and transparent way to track changes in regulations while also providing more transparency for regulators.
Additionally, blockchain data is easier for regulators to verify than data from legacy systems because these records are time-stamped, verified by the consensus of other users on the system, and cannot be altered without a trace.

Furthermore, blockchain can significantly reduce compliance costs by reducing accounting, which can save financial institutions approximately $10 billion annually.

As a result, it makes sense for financial institutions to have technology that can help automate these processes by tracking regulators’ guidelines and helping businesses comply.

And this is precisely where XVA Blockchain comes into play. Because we are able to combine RegTech and blockchain and thus offer added value. We provide services in derivatives trading to banks and other financial institutions. We have identified use cases and re-thought them as applications operating on blockchain (distributed ledger) technology. The application of blockchain technology bears some specific advantages, namely superior security, transparency, and reliability compared to centralized approaches.

Examples of RegTech usage via Blockchain include XVA-Analytics, Trade Repository Reporting, and Smart Derivatives Contracts.

The fact that Blockchain and RegTech complement each other has clear advantages. They can be used together to improve regulatory compliance, promote economic stability, and better protect consumers and financial institutions from fraudulent activity.

In particular, using our Smart Derivatives Contracts creates a secure environment for trading assets.
Blockchain can create a tamper-proof ledger for transactions, while RegTech helps regulate those transactions through regulatory practices.

If you are looking for cost-saving long-term solutions for your financial institution, you are welcome to contact us at any time.


XVA-Blockchain Software Demo

Thanks for your interest in our XVA-Blockchain Software Demo. In order for us to schedule a meeting and prepare the demo for you, please complete the form below. We will get in touch with you shortly after the data has been processed by us.

This form collects your name, email and telephone number so that we can get in touch with you concerning your desired demo appointment. Check out our privacy statement for the full story on how we handle your data.