The financial industry has been shaken up once more by UBS’ decision to acquire its rival, Credit Suisse, a move which highlights the urgent need for an upgrade to our financial system. Credit Suisse has not been the most popular among investors in recent years, reporting major losses in the current financial crisis. In 2022, the bank saw $8 billion in net losses, its largest-ever annual loss before disclosing “material weaknesses” following the downfall of Silicon Valley Bank (SVB) and Signature Bank in the United States.
This current banking saga is underlining the need for introducing transparency and auditability to the people who are putting their life savings and retirement funds into what they believe to be a trusted institution. The financial situation is far from improving, and an upgrade to our financial system is long overdue. Blockchain technology can provide a comprehensive answer to the problems of financial system transparency and audibility.
Blockchain is still underused by many industries even though it has proved to be a great tool in improving the future of where the financial industry is headed. Furthermore, future advancements in blockchain technology, such as zero-knowledge proofs, will allow customers to maintain a necessary level of privacy while also providing full auditability on a scale never seen before in human history.
Introducing Blockchain Technology in Banking
By introducing blockchain technology into the traditional banking sector, we can help the public save billions of dollars per year in fees while also minimizing, or even eliminating, the need for trusting third parties. Blockchain is an auditable and transparent ledger of transactions and states, eliminating the need for shady bookkeeping practices to create false totals. On a blockchain, money cannot be fabricated, doubled or inflated. Meanwhile, solvency information is available for public scrutiny at any time.
However, the current financial situation is making older generations, who have already been in similar circumstances, relive past events. People who held dollars in deposits in 2008 were lied to by bankers. This time around, the liars are now the central bankers, bankers and bank regulators, making it increasingly harder for people to trust the traditional financial system again, unable to regain the points it had recently lost.
The distrust that rose for the blockchain industry since the current FTX debacle is not entirely fair, as the disaster is unrelated to the core blockchain industry and technology. Sam Bankman-Fried was the one who stole money from his customers, and ironically, this would not have happened if blockchain and decentralization had been in place. FTX is yet another example of a centralized financial system failure, not blockchain.
Established institutions are reluctant to use blockchain technology because they are afraid of the unknown. The US regulatory landscape, including the SEC and CFTC, is making things harder for the mass adoption of blockchain and cryptocurrencies. They refuse to understand that blockchain technology will be better for both people and institutions.
The recent bank failures are hinting at something else. They’re showing everyone that the transformation of the system is more urgent than ever before. Isn’t it ironic how, in a banking industry that is still mostly powered by technology from the 1960s, we have the technology ready and waiting to be implemented? And while the technology from the 1960s is powerful on its own, it cannot provide a comprehensive answer to the problem of financial system transparency.
The banking industry has traditionally been associated with centralized power, but with the advent of blockchain technology, this power can be taken back by the consumers. It can create a peer-to-peer banking system that is transparent, auditable, and trustless, which is exactly what we need right now.
In conclusion, the current banking saga has shown that an upgrade to our financial system is necessary. Blockchain technology can offer a comprehensive solution to the problems of financial system transparency and audibility. It is a tool that can provide a more efficient, transparent, and auditable financial system for the public. By introducing blockchain technology into the banking sector, we can help the public save billions of dollars per year in fees while also minimizing the need for trusting third parties. In this way, the power can be taken back by the consumers, and we can create a more transparent and decentralized financial system.