According to the reports of Bloomberg on the 7th of June ’19, while distributed ledger technology [DLT] is rapidly gaining traction in many sectors of the global economy which include remittance, investment banking, payments and others, a new report by McKinsey & Co has revealed that the retail banking sector has been quite slower in integrating the blockchain technology due to regulatory challenges and other bottlenecks.
According to a Bloomberg report, citing the latest research conducted by McKinsey and Co which is a U.S.-based global management consulting firm, “A vast array of retail banks have been cautious or even wary of adopting and integrating the burgeoning blockchain technology into their operations, despite the potential the technology offers.” McKinsey has revealed that the current regulatory uncertainties plaguing the blockchain ecosystem, as well as the super volatile nature of altcoins and Bitcoin [BTC], have made the retail banking space cautious.
Investment banks, infrastructure providers and governments, on the other hand, are busy experimenting with blockchain technology with an aim to formulate new ways of cutting down prices, while also promoting productivity. “For instance, investment banks envisage a world where transaction execution, post-trade processing, and settlement are instantaneous, cutting-off numerous middle-and back-office processes. They are also focused on the potential for smart contracts to increase automation,” stated McKinsey. As per the report, despite the fact that financial regulators across the globe which include the Securities and Exchange Commission [SEC] of the United States of America, the Financial Conduct Authority [FCA] of the United Kingdom and others are yet to formulate amenable rules for the sector.
Alongside the regulatory uncertainty, large companies and venture capitalists continue to pump big amounts of money into the blockchain sector. The McKinsey report revealed that in the year 2017, the price of bitcoin hit an all-time high of $20k USD, VC firms invested a whopping $1 billion in the DLT sector. Despite the difficult challenges, some smart thinking retail banks have formed alliances with blockchain projects in recent times, in a bid to leverage the potentials of the technology. As per reports in the year 2018, Banco Santander announced its plans to launch a mobile payments solution for their clients using the distributed ledger system of Ripple.