Industry Leaders Weigh In: Takeaways from our crypto roundtable hosted with CMS UK
As the financial landscape continues to evolve, the intersection of traditional banking and the crypto industry presents both challenges and opportunities. To gain valuable insights into these topics, I had the privilege of interviewing industry leaders who shared their perspectives on navigating regulatory challenges, the future of blockchain in traditional financial institutions, and the global regulatory landscape for cryptocurrencies. Here’s what they had to say:
Banks entering the digital asset/crypto space should be conducting comprehensive analyses of the relevant regulations, albeit ambiguous but many already in the pipeline across the globe, implementing robust AML and KYC procedures, and engaging with regulators to seek guidance and establish compliance expectations. They should be developing internal policies and risk management frameworks, collaborating with compliance technology providers, and investing in staff training to ensure adherence to regulations. Regular compliance reviews and industry collaborations are also essential to stay updated in this fast-paced industry, and quick adoption of evolving regulatory frameworks.
Chloe Nightingale, Head of Business Development & Partnerships, KYAX
The conversation then shifted to the future of blockchain technology within traditional financial institutions. According to Sean Kiernan, CEO of Greengage, “There is most definitely a future for blockchain technology within traditional financial institutions.” Kiernan emphasized that blockchain’s potential applications extend far beyond digital currencies. Specifically, he highlighted three main use cases for blockchain in finance:
- Efficiencies in Payments and Capital Markets Infrastructure: Blockchain can streamline back-end processes, reduce operational costs, and enhance efficiency by enabling faster settlement times, simplifying complex transactions, and minimizing the need for intermediaries through transparency and the use of smart contracts.
- Supporting the Rollout of Digital Identity Frameworks: Blockchain-based digital identity frameworks can improve collaboration across financial services firms, open access to a broader suite of products and services for consumers, and create opportunities for seamless onboarding by sharing the costs of KYC/KYB checks across firms.
Kiernan noted that while there are regulatory and scalability challenges to overcome, many traditional financial institutions recognize the transformative potential of blockchain technology. As central banks explore the rollout of central bank digital currencies (CBDCs), financial institutions, including major banks, are gradually exploring blockchain implementation, often starting with custodial services for crypto assets.
Richard Crook, CEO of LAB577, emphasized the benefits of regulated institutions getting involved in the crypto industry. He stated, “The benefit to the end investor is that the same safeguards, checks and balances that they take for granted with TradFi will be applied to DeFi.” This convergence of traditional finance and decentralized finance is seen as an inevitable and irreversible trend.
Reflecting on the evolution of the crypto industry, Helen Disney, Director at The Realization Group, highlighted the convergence between mainstream financial institutions and distributed technologies. She stated, “As Traditional and Decentralized finance continue to merge, we are witnessing an era of convergence between mainstream financial institutions and distributed technologies.” Helen emphasized that blockchain and distributed ledger technology (DLT) will increasingly underpin traditional finance, with major institutions investing in these technologies. She also noted that while global regulation of crypto is unlikely, greater harmonization of standards globally and increased clarity in regulatory acceptance across jurisdictions are desirable.
These insights from industry leaders shed light on the challenges and potential of the crypto industry, the integration of blockchain technology in traditional finance, and the regulatory landscape. As the financial ecosystem continues to evolve, collaboration between industry participants, regulators, and technology providers will be crucial for harnessing the transformative power of blockchain and ensuring a secure and compliant future.