How Blockchain (and BCT) Can Close the Compliance Gap

In a TEDx talk last year, self-professed “Blockchain Futurist and Patron Saint of Trusted Commerce,” Richie Etwaru, declared that blockchain technology will become the fourth great “gap-closing” invention of the modern age. The sequence goes like this: the printing press closed the knowledge gap, the combustion engine closed the power gap, while the internet continues to close the distance gap. Blockchain, Etwaru declared, will close the trust gap. I would argue that if you are an organization in one of the more heavily regulated industries — like finance and healthcare — you might be equally interested in whether it can close the compliance gap.

The complex and fast-evolving regulatory landscape has been the leading source of executives’ complaints and money-sapping headaches within those industries for decades, especially in the financial services arena. Institutions must constantly keep pace with a myriad of reporting requirements that require them to know their customers (KYC) more deeply than almost anyone in any other industry, and ensure that their actions do not facilitate money laundering (AMC) or any other form of fraud.

Few doubt that, on the face of it, blockchain technology has the potential to revolutionize the transaction process and aid the compliance efforts of financial services providers. The notion of accessing an immutable, distributed ledger featuring crypto technology for the identification, verification and traceability of transactions, is a mouthwatering prospect. The thought that we can move beyond trying to anticipate the future thoughts of a single, centralized regulatory authority is, in and of itself, appealing to many.

The blockchain vision is for financial institutions to share an integrated system that not only handles the KYC and AML processes but offers audit access to third-party regulators. In those respects alone, it sounds like the regtech equivalent of the moon on a stick. But, of course, the cryptocurrency world is a volatile and risky place to play, and for hedge funds and other institutions, there are plenty of hurdles to blockchain adoption, mainly centered around technology, compliance and cost.

For starters, an enterprise-wide deployment of blockchain technology — as in, replacing every legacy transaction system — would represent a seismic and prohibitively costly operation for most organizations. Also, even those solutions that are designed to integrate with existing systems are distinctly lacking in compliance tools.

It is not that the industry ever made a collective decision to avoid the blockchain party. On the contrary, institutions are experiencing a high demand for digital currencies, and there is every reason to believe that there are billions sitting on the hedge-fund sidelines because of compliance risks. Most of these organizations currently lack the trading infrastructure to play in the crypto space. Which begs the question: Where are the startups and the solutions? Why isn’t anyone solving the crypto compliance puzzle?

Actually, that is exactly what our company, BCT, is trying to do.

This month we roll out our Blockchain Terminal, a one-stop crypto interface, integrating all the tools and information that institutions need to purchase cryptocurrencies. The hardware comprises two stacked 38-inch curved screens, but it is what’s inside that we believe offers the greatest hope for a secure, compliant gateway into cryptocurrency trading.

BCT is a professional-grade information feed, aggregating news, and data from the top cryptocurrency exchanges and 1,400 crypto currencies, along with ICO information and updates from 40,000 media outlets. Second, it provides advanced trading data analytics and charting tools for all trading strategies. Third, it comprises an open app store for institutions along with apps for front, middle and back office. Fourth, and most critical, it comes with top-notch compliance monitoring and audit trail foundation — the missing pieces.

At the heart of the offering is the proven ComplianceGuard technology, a deep-compliance framework that satisfies even the strictest hedge fund requirements, and already boasts 88,000 users throughout the industry. Powered exclusively by BCT utility tokens, the Blockchain Terminal is currently being piloted at 20 hedge funds and will launch officially by the end of Q1.

The core idea is to give hedge funds and other institutional investors an option for high-compliance trading of cryptocurrencies. If companies jump on board, the product could spark a significant shift in regulatory dynamics. Not only will institutions enjoy cost savings from sharing the burden of fulfilling the KYC and AML commitments, but with a regulatory body able to view all transactions in a network, the onus will shift to the financial institution to take a more active role in identifying fraud analysis of transactions in real time. And providing the regulators are ready, this could go some way to close that compliance gap.