At the Same Table as Regulators

How a Compliance-Driven Public Blockchain is Changing Perceptions Towards Emerging Technology in Financial Markets

After overcoming initial teething problems with regulatory compliance, enterprise and consumer acceptance, financial technology (FinTech) has reached a zenith, with neobanking services and consumer finance applications no longer a niche offering but a growing significant proportion of banking services.

Yet even as FinTech finds its footing in old money, no other technology trend in this century has generated the multiple levels of evolution as that of blockchain since it burst into the consciousness of mainstream finance just over two years ago.

Bitcoin, with the first-of-its-kind cryptographic algorithm that allowed it to operate as a new form of currency;  permissionless and decentralized yet secure and immutable. Its low barrier to entry, free access and open participation coupled with transparent and yet private ownership appeared to challenge the very foundations of banking and finance.

Potential but not quite proven

Looking past the various controversies of the technology’s precursors it became clear that there was vast potential for a much wider application of blockchain. While many private and in fact state-sponsored development  projects remain well in the domain of the hypothetical, there has been notable progress even in conventional financial markets.

These include the Australian Securities Exchange as the first major bourse to take the decision to use DLT as part of its settlement infrastructure. The technology was deemed successful but overall regulatory amendments to account for blockchain have caused a delay to implementation.

A similar blockchain pilot saw the Bank of Canada successfully settle cash transfers between banks for equity transactions between private parties together with the Toronto Stock Exchange (TMX Group) and Payments Canada. Once more, technology was not the problem.  Participants saw immediate benefits in efficiency, reliability, and security. Again it was how blockchain would fit into existing legal and regulatory architecture.

A common theme exists throughout; should blockchain be designed to fit within existing terms or should legislation be amended to accommodate. 

Bank of Canada fintech director Scott Hendry told the FT: “We see that there is promise in distributed ledger. But when you are looking at core systems that are systemically important and have been optimized over 20 years or more, the bar is very high for this alternative technology to offer significant benefit.”

So, even with demonstrable benefits, it is clear that blockchain needs to convince current participants that it can overcome identified issues, particularly those of privacy, legal and regulatory compliance not to mention security and ethics.  The bar is especially high for blockchain given the socio-economic impact on legacy business models.

Reversing the problem

The thinking behind blockchain implementations has always been driven by technology efficiencies and social ideology with legal and regulatory matters as an afterthought. But what if research and development focused instead on these issues especially since the efficiencies are now well-evidenced?

Such is the premise behind the WORBLI enterprise-grade blockchain, whose construction focuses wholly on it being the main compliance layer for traditional and innovative financial markets. 

WORBLI Foundation Director,  Domenic Thomas underlines the unique approach of the WORBLI blockchain:

“Every blockchain application ever introduced to financial markets eventually runs into the compliance wall, simply because they weren’t built to fit into existing laws in their respective jurisdiction. But what if we first identified the key components that traditional markets considered as pre-requisites and then built them into our blockchain? Wouldn’t that allow blockchain technology to finally sit at the same table as other solutions, alongside regulators?”

AmaZix LimitedCEOJonasKarlberg suggests that blockchain technology, even as an emergent technology, had reached a stage of evolution where it needed to mature:

“In the excitement of innovation, blockchain projects often forget to build solutions that are relevant to how financial markets actually work. I think it’s time that blockchain projects stopped putting the horse before the cart. We have to accept the reality that Anti-Money Laundering (AML) and Know Your Customer (KYC) compliance will become more complex to achieve, and rightly so. Financial innovation shouldn’t come at the price of ethical and sustainable operations, and WORBLI’s aim is to get that right first.”

Karlberg goes on to say that WORBLI’s additional aspect Compliance-as-a-Service wasn’t just another buzzword, but an acknowledgment of the current regulatory landscape with multiple considerations requiring modern approaches; such as risk-based approaches in policy-settings, alert management systems, GDPR-compliant transactional monitoring and reporting systems to name but a few.

“A successful and useful solution will require meeting the guidelines set out by the likes of FinCEN, OECD and FATF, not to mention Fifth Anti-Money Laundering Directive requirements that have already come into force. This will be of particular importance to emerging platforms in the so-called decentralized finance (DeFi) sector.”

AmaZix Limited CTO Luke Saunders summarized: “The premise is well-recognized. The promise excites us. We truly believe that, once ready, the solution will achieve great interest and commercial adoption And this is why AmaZix Capital entered into the Asset Purchase Agreement (APA) last month with WORBLI, to ensure that its technology can expand and we can accelerate its roll out.”

About AmaZix Capital

AmaZix Capital is a firm focused on advising groundbreaking technology innovators in strategic and corporate finance matters. AmaZix Capital offers services ranging from consulting on corporate projects in relation to Distributed Ledger Technology (“DLT”) and providing expert advice on token economics (“Tokenomics”), to helping promising existing and new ventures find growth capital. AmaZix Capital’s partners include several senior bankers with a long track record in Financial Institutions M&A and Capital Markets advisory as well as Special Situations. AmaZix Capital’s Special Situations Group is managed in a joint venture with 0rigin Ventures.

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