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European Banking Authority publishes report on Risk & Opportunities arising from the use of DLT

 

On the 3rd of July 2018, the EBA has published a report studying a few use cases in relation with FinTechs. Among those, two relates to the blockchain technology (link here).

The first case assesses the potential of DLTs and smart contracts in the context of trade finance. The EBA highlights the groundbreaking potential use of DLTs, notably with regards to the burdensome current system of the letter of credit. Furthermore, the Authority explains that there are still many regulatory uncertainties that may hamper the adoption of the technology as an end-to-end overall solution. Nevertheless, the use of DLTs could create an evolution of our current AML/KYC and Customer Due Diligence practices.

The second use case discusses the question of DLTs when used to manage a digital identity. If a digital identity is currently a hot topic, notably with regards to the adoption of the message on the swiss E-ID Act in early July 2018 by the Federal Council (link here), this still raises some regulatory concerns. Particularly, the EBA highlights the personal data potential issues with regards to the GDPR, while recognizing at the same time the efficiency of these systems to comply with KYC/AML/CDD requirements. Nevertheless, the use of a digital identity will play a great role in the future, since an efficient, compliant and user-friendly process will be deeply needed.

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