Blockchain ‘could replace banks and clearing houses’

Written by Anthony Strzalek

Blockchains that transact with one another could replace central authorities such as banks, clearing houses and lawyers in the future, a new report has predicted.

According to an Institute of Chartered Accountants in England and Wales (ICAEW) study, with the ability to directly interactthe technology could save firms the cost and effort of doing business with a ledger owner, and increase transparency and security against financial crime.

Blockchain has the potential to be used in a number of areas, according to the report, such as smart contracts, inter-bank reconciliation and the transfer of assets, such as land registry. However, it is not just of use to businesses.

However there still remains constraints and challenges before blockchains can reach their full potential. These are both logistic – related to aspects like computing power and when encryption might be necessary – and legal, as new legal frameworks would need to be created for example to enforce contracts, the report states.

David Lyford-Smith, technical manager of IT at ICAEW, said: “Blockchains mean organisations can work together without an intermediary, but no longer need to have institutional trust in one another. This is potentially a seismic shift in how we do business. It will have knock-on effects on everything from record keeping to supply chain management and accounting and audit.

“It could potentially remove middleman institutions, gain transactional certainty, reduce cost and bias and open up access to more participants.”