GL BAJAJ INSTITUTE OF TECHNOLOGY AND

MANAGEMENT, GREATER NOIDA

MINI PROJECT-2
ON
“ROLE OF BLOCKCHAIN IN FINANCE SECTOR”

TOWARDS THE PARTIAL FULLFILLMENT FOR THE AWARD OF

DEGREE OF
MASTER OF BUSINESS ADMINISTRATON (MBA)
(Dr. A.P.J. Abdul Kalam Technical University, Lucknow, Uttar Pradesh)

By
Anushi Agarwal
Roll no. 2301920700075
Session: 2023-24
Under the Supervision of
Dr. Kriti Swarup
 DECLARATION

I hereby declare that the work presented in this report entitled “MINI PROJECT-2", was

carried out by me. I have not submitted the matter embodied in this report for the award of

any other degree or diploma of any other University or Institute. I have given due credit to

the original authors/sources for all the words, ideas, diagrams, graphics, computer

programs, experiments, results, that are not my original contribution. I have used quotation

marks to identify verbatim sentences and given credit to the original authors/sources.

I affirm that no portion of my work is plagiarized, and the experiments and results reported

in the report are not manipulated. In the event of a complaint of plagiarism and the

manipulation of the experiments and results, I shall be fully responsible and answerable.

Name: ANUSHI AGARWAL

Roll. No.: 2301920700075

(Candidate Signature)
 GL BAJAJ
INSTITUTE OF TECHNOLOGY &MANAGEMENT
Approved by A.I.C.T.E. & affiliated to Dr. A.P.J. Abdul Kalam Technical University

CERTIFICATE

This is to certify that ANUSHI AGARWAL, Roll No. 2301920700075 has undertaken this

project titled “ROLE OF BLOCKCHAIN IN FINANCE SECTOR” for the partial fulfillment of

the award of a Master of Business Administration degree from Dr. A P J Abdul Kalam

Technical University, Lucknow (U. P.).

I wish him/her all the best for his/her bright future ahead.

Date:

Project Supervisor
Department of Management Studies

Head of Department

Department of Management Studies

 ACKNOWLEDGEMENT

I would like to express my sincere gratitude to all those who have contributed to the

successful completion of this Mini-Project Report. Their guidance, support, and insights

have been invaluable throughout this endeavor.

First and foremost, I extend my heartfelt thanks to my faculty mentor for his/her

unwavering encouragement and mentorship. His/her expertise and constructive feedback

have significantly enriched my understanding of the subject matter.

Secondly, I appreciate the industry professionals, practitioners, and experts who generously

shared their time and knowledge during interviews, surveys, and interactions. Their real-

world insights have provided practical context to our theoretical analyses.

Lastly, I am using this opportunity to express my gratitude to.............................. (HOD)

who supported me throughout the course and constantly reviewed my progress. In

conclusion, this project has been a rewarding learning experience, and I am grateful to

everyone who contributed to its successful completion.

Thank you.

Sincerely,

Anushi Agarwal

03/07/2024
Sr. No. Particular Pg. No.

1. DESCRIPTION OF INDUSTRY

2. LITERATURE REVIEW

3. INDUSTRY ANALYSIS

EMERGING TRENDS OF BLOCKCHAIN

4. TECHNOLOGIES IN THE FINANCE
INDUSTRY

CRITICAL ANALYSIS (PROS AND

5. CONS) OF THE BLOCKCHAIN
TECHNOLOGIES IN FINANCE INDUSTRY

6. PESTLE ANALYSIS

7. CONCLUSION

8. REFRENCES

INDEX
 DESCRIPTION OF INDUSTRY

An immutable, unhackable distributed ledger of digital assets is a platform for truth and

trust. The implications are staggering not just for the financial services industry but also

right across virtually every aspect of the society.

The Financial Industry has been trying to experiment with blockchain by replicating

existing asset transactions on the blockchain. While this allows some scope for

efficiency implication of a blockchain solution, what gets missed out is the ecosystem

implications of a blockchain solution. In infrastructure terms the blockchain is an open-

source software that is built to support the transfer of digital assets amongst market

participants in real time. Using any preferred blockchain’s APIs one can showcase a

dramatic reduction in asset transfer costs and timelines. Most bank

implementations are focused on this aspect. But while scaling proof of concept into a

real-world scenario, financial institutions end up implementing the same application

layer that exists currently with all the current checks and balances.

Commercial Banks: Provide a wide range of financial services, such as accepting

deposits, lending money, and offering basic financial products.

Investment Banks: Focus on assisting corporations and governments in raising capital

through underwriting securities, mergers and acquisitions, and advisory services

Investment Management:

Asset Management: Involves managing portfolios of securities (stocks, bonds, etc.) on

behalf of individuals, institutions, or mutual funds.

Hedge Funds: Private investment funds that employ various strategies to generate high
returns for their investors.

Private Equity: Funds invested in privately held companies, aiming to provide capital

and expertise to support growth and enhance value.

Insurance: Life Insurance: Offers financial protection to individuals and families against

the risk of death, providing benefits upon the policyholder's demise.

Property and Casualty Insurance: Covers damages to property and legal liabilities arising

from accidents or other unforeseen events.

Financial Technology (Fintech):

Digital Payments: Companies providing online payment solutions, mobile wallets, and

digital currency platforms.

Peer-to-Peer Lending: Online platforms that connect borrowers directly with lenders,

bypassing traditional financial institutions.

Robo-Advisory: Automated investment platforms that use algorithms to provide

personalized investment advice.

 LITERATURE REVIEW

What is block chain technology?

According to Yaga et al. (2019) blockchains are a type of digital ledger that cannot be

altered without leaving clear evidence of having been altered. Since these digital ledgers are

deployed in a distributed fashion, there is typically no central repository or authority, such

as a bank, corporation, or government. This is due to the lack of a necessity for a

centralized repository and authority. At its most basic level, blockchains enable a group of

people to track transactions among themselves via a shared ledger. Because of how the

network was designed to work, once a transaction has been recorded on a blockchain, it

cannot be modified, making it impossible to modify the transaction. In other words, a

Blockchain is a decentralized, unchangeable ledger that makes it easier to record

transactions and manage assets within a commercial network. An asset is anything that can

be physically touched, like a house, car, money, or a piece of land. However, intangible

things like intellectual property, patents, copyrights, or trademarks can also be viewed as

assets. A blockchain network can be used to track and exchange anything of value, which

lowers the associated risks and expenses for all parties involved (Saberi et al., 2019; Yaga

et al., 2019). According to Yaga et al. (2019), the introduction of the Bitcoin network in

2009 marked the beginning of widespread public awareness of blockchain technology.

When using Bitcoin and other systems that are theoretically similar to it, it is hypothesized

that the transfer of digital information that represents digital payment takes place through a

distributed network.

The first of several cryptocurrencies currently in use was Bitcoin, and there are currently

many additional cryptocurrencies. Blockchain technology enables Bitcoin users to

digitally sign documents and transfer their rights to those documents to other users.

This transmission is publicly recorded in the Blockchain data, allowing all network

participants to independently verify the validity of the transactions. The durability of the

blockchain in the face of attempts to alter the ledger is aided by the use of cryptographic

techniques as well as the fact that each participant in the bitcoin blockchain is in charge of

keeping and administering their copy of the ledger. Blockchain technology’s

advancement has made it possible to create a variety of cryptocurrency systems, including

Bitcoin and Ethereum. As a result of this, blockchain technologies are commonly

considered to be limited to Bitcoin or maybe cryptocurrency applications in general.

Nevertheless, this is not the case. This image continues to exist even though the

technology is now used in a greater variety of applications and is being researched in a

variety of different industries (Pilkington, 2016; Saberi et al., 2019; Yaga et al., 2019).

Since businesses are dependent on information and their success is directly proportional

to the speed with which they receive and act upon that information, “blockchain

technology is ideally suited for the delivery of information since it provides information

that is, immediately shared and completely transparent and that is, stored on an immutable

ledger that can only be accessed by network members who have been granted permission

to do so”. A blockchain network can keep tabs on orders, payments, accounts, production,

and a lot more. Since members of the network share a single view of the truth, you can

view all of the details of a transaction from beginning to end”. This provides you with

increased confidence, in addition to new opportunities and efficiencies.

 INDUSTRY ANALYSIS

The finance industry is a broad sector that encompasses various financial services,

including banking, investment management, insurance, and financial technology

(fintech) companies. It plays a crucial role in facilitating economic growth, capital

allocation, and risk management. For MBA students interested in pursuing careers in

finance, understanding the industry's dynamics, trends, and challenges is essential. This

industry profile provides an overview of the finance industry, highlighting its key

segments, trends, and career opportunities.

Key Segments:

1. Banking:

Commercial Banks: Provide a wide range of financial services, such as accepting

deposits, lending money, and offering basic financial products.

Investment Banks: Focus on assisting corporations and governments in raising capital

through underwriting securities, mergers and acquisitions, and advisory services.

2. Investment Management:

Asset Management: Involves managing portfolios of securities (stocks, bonds, etc.) on

behalf of individuals, institutions, or mutual funds.

Hedge Funds: Private investment funds that employ various strategies to generate high

returns for their investors.

Private Equity: Funds invested in privately held companies, aiming to provide capital

and expertise to support growth and enhance value.

3. Insurance:
Life Insurance: Offers financial protection to individuals and families against the risk of

death, providing benefits upon the policyholder's demise.

Property and Casualty Insurance: Covers damages to property and legal liabilities arising

from accidents or other unforeseen events.

4. Financial Technology (Fintech):

Digital Payments: Companies providing online payment solutions, mobile wallets, and

digital currency platforms.

Peer-to-Peer Lending: Online platforms that connect borrowers directly with lenders,

bypassing traditional financial institutions.

Robo-Advisory: Automated investment platforms that use algorithms to provide

personalized investment advice.

5. Industry Trends:

Technological Innovation: Advancements in artificial intelligence, blockchain, data

analytics, and cloud computing are transforming the finance industry. Fintech companies

are disrupting traditional financial services, offering innovative solutions and improving

efficiency.

Regulatory Environment: Stringent regulations have been implemented since the global

financial crisis to enhance transparency, risk management, and consumer protection.

Compliance and risk management have become critical focus areas for financial

institutions.

Sustainable Finance: Environmental, Social, and Governance (ESG) considerations are

gaining prominence in the finance industry. Investors are increasingly focusing on

sustainable investing, driving the demand for ESG-compliant products and services.
Digital Transformation: The industry is experiencing a shift towards digital channels,

with online banking, mobile apps, and digital customer experiences becoming the norm.

Traditional banks are investing heavily in digital technologies to enhance customer

engagement and streamline operations.

Career Opportunities:

Investment Banking Analyst/Associate: Work on mergers and acquisitions, financial

analysis, and capital raising activities for corporations.

Asset Manager/Portfolio Manager: Manage investment portfolios and make investment

decisions to generate returns for clients or institutions.

Risk Analyst: Assess and manage financial risks, including credit risk, market risk, and

operational risk, for banks and financial institutions.

Financial Consultant: Provide advisory services to individuals or companies on financial

planning, investment strategies, and wealth management.

Fintech Specialist: Work in innovative fintech companies, focusing on areas such as

digital payments, blockchain, or robo-advisory.

The Indian banking system consists of 12 public sector banks, 22 private sector banks,

44 foreign banks, 43 regional rural banks, 1,484 urban cooperative banks and 96,000

rural cooperative banks in addition to cooperative credit institutions. As of September

2021, the total number of ATMs in India reached 213,145 out of which 47.5% are in

rural and semi-urban areas.

According to the RBI, bank credit stood at Rs. 116.8 lakh crore (US$ 1.56 trillion) on

31st December 2021.

As of February 2022, credit to non-food industries stood at Rs. 114.10 trillion (US$ 1.53

trillion).

In FY18-FY21, bank assets across sectors increased. Total assets across the banking

sector (including public and private sector banks) increased to US$ 2.48 trillion in FY21.

In FY21, total assets in the public and private banking sectors were US$ 1,602.65 billion

and US$ 878.56 billion, respectively.

Source:

RBI has decided to set up Public Credit Registry (PCR), an extensive database of credit

information, accessible to all stakeholders. The Insolvency and Bankruptcy Code

(Amendment) Ordinance, 2017 Bill has been passed and is expected to strengthen the

banking sector. Total equity funding of the microfinance sector grew 42% y-o-y to

Rs. 14,206 crore (US$ 2.03 billion) in 2018-19.

As of February 21, 2022, the number of bank accounts opened under the

government’s flagship financial inclusion drive ‘Pradhan Mantri Jan Dhan Yojana

(PMJDY)’—reached 44.63 crore and deposits in the Jan Dhan bank accounts totaled Rs.

1.58 trillion (US$ 21.25 billion).

Rising income is expected to enhance the need for banking services in rural areas, and

therefore, drive the growth of the sector.

India is the world's largest market for Android-based mobile lending apps, accounting

for ~82% of all online lenders worldwide. India currently has 887 active lending apps,

which is relatively low, as there are few suppliers of blockchain technology and the

technology itself is relatively standardized. Additionally, the cost of switching between

suppliers is relatively low, as most blockchain-based systems are designed to be

interoperable with each other.

EMERGING TRENDS OF BLOCKCHAIN TECHNOLOGIES IN THE

FINANCE INDUSTRY

1. Stock Exchange and Share Trading

Buying and selling stocks and shares has always involved a lot of third parties, such as

brokers and the stock exchange itself. Here is how trading works:

● The buyer or seller initiates the trade.

● A broker sends a transaction to a stock exchange.

● The transaction is matched with another party (the counterparty).

● The transaction is sent to the Central Counterparty Clearing House for risk

evaluation.

● The buyer’s or seller’s representatives work with the Central Securities

Depository (CSD) to record the transfer.

● The transaction is sent to the Registrar or Transfer Agent of Initial Trade to

update their list of shareholders.

● As you see, the traditional stock exchange process involves lots of stages and

bureaucracy and can take up to 3 days. However, the decentralized nature of

blockchain technology in banking can remove all those unnecessary

intermediaries and enable trading to be run on computers all over the world. No

more dedicated servers united into an interconnected network.

● Usage Examples: In 2015, Nasdaq, the world’s second-largest stock exchange

company, was planning to use blockchain for their Private Market Platform. They
 were going to implement a colored coin concept that could help to distinguish the

coins used for trading from other coins. Besides, together with Citigroup, Nasdaq

invested into the Chain blockchain ledger to power a shared and trusted distributed

database that records all transactions and ownership changes in real-time.

2. Trade Finance

Blockchain also plays an important role in the trade finance sector – financial activities

that are related to commerce and international trade (not stock exchange trading). Even

in today’s disruptive world of technology, many trade finance activities still involve lots of

paperwork, such as bills of lading, invoices, letters of credit, etc. Of course, many order

management systems allow us to carry out all this paperwork online, but still, it

consumes lots of time.

● Usage Examples: In 2016, Ornua, an Irish manufacturer of dairy products,

partnered with Barclays to complete the world’s first blockchain and banking

trade transaction. In 2017, IBM and Maersk collaborated to work on the first

cross-border, blockchain-based supply chain solution.

3. Digital Identity Verification

Online financial transactions are impossible without identity verification. However, this

verification requires a lot of steps to be taken, such as:

● Face-to-face checking (can be also via a video call such as Skype).

● Authentication: The bank client needs to prove their identity every time they log

in to the service.

● Authorization: A proof of the client’s intentions is needed.

 ● All of these steps need to be taken for each new service provider. However,

blockchain makes it possible to securely re-use identity verification for other

services.

● Usage Examples: Cambridge Blockchain and Tradle are examples of fintech

startups that are using blockchain to disrupt banking and working on blockchain-

based customer identification systems.

● Tradle uses blockchain to store proofs of data verifications and give total

ownership and control of data to the owner. This means the customer manages

the sharing with banks directly, thus the customer becomes the utility. Tradle’s

approach enables the owner to share their data across lines of business, with any

institution and across any border without breaching any data locality laws, or

regulations such as GDPR.

● Another example is ID2020, a project aimed at creating digital identities for

people who have no paper IDs. The project is supported by Accenture, Microsoft,

and the Rockefeller Foundation.

4. Syndicated Lending

Syndicated lending refers to providing loans to individuals by a group of lenders, typically

banks (a syndicate). Due to several participants involved, the traditional processing of

such syndicated loans by banks can take up to 19 days. Banks that process syndicated

loans face the following challenges:

● Know Your Customer (KYC) – client identity verification.

● Bank Secrecy Act (BSA) and Anti-Money Laundering (AML) – legal actions

aimed at prevention, detecting, and reporting of money laundering activities.

 ● Blockchain financial services can supercharge this process and make it more

transparent. With blockchain’s decentralized ledger, banks within a syndicate can

distribute tasks related to local compliance, KYC or BSA/AML and link them to

a single customer block.

● Usage Examples: In 2016, Credit Suisse, Symbiont, R3, and Ipreo successfully

finished an initial stage of a project related to the use of blockchain technology

on the syndicated loan market. In April 2018, seven international banks,

specifically BNP Paribas, BNY Mellon, HSBC, ING, Natixis, and State Street,

have united to support Fusion LenderComm by Finastra, a blockchain platform

for syndicated loans.

5. Accounting, Bookkeeping, and Audit

Probably no other sphere that involves as much paperwork as accounting, and it is

digitalized relatively slowly. The reason behind that may be in strict regulatory

requirements regarding data validity and integrity. Therefore, accounting is another

domain that can be transformed with the power of blockchain technology finance, from

simplifying the compliance to streamlining the traditional double-entry bookkeeping.

Instead of keeping separate records based on transaction receipts, companies can write

their transactions directly into a joint register, with the entries distributed and

cryptographically protected. As a result, the records are more transparent, and any

attempts of forging are almost impossible. Think of it as an “electronic notary” verifying

the transactions. In addition, blockchain’s smart contracts can be used to automatically

pay invoices.
 ● Usage Examples: In 2018 PricewaterhouseCoopers announced the launch of the

first blockchain auditing service that will allow checking how the companies are

using fintech blockchain.

6. Credit Reports for Businesses and Individuals

Blockchain finance can also help individuals and small businesses to quickly get loans

based on their credit history. It may take a long time for lenders to review the borrower’s

credit history. Traditional business credit reports provided by third-party credit bureaus

are not available for small business owners. Besides, paying companies to access their

sensitive data sounds strange and insecure. However, blockchain can provide tools that

will allow borrowers to make their credit reports more accurate, transparent, and securely

shareable. Here’s how it works with blockchain:

● The data owner places their transaction history into the blockchain and secures it

with a private key.

● The encrypted transaction is stored outside the blockchain.

● The hashed encrypted transaction is stored inside the blockchain with timestamps

and metadata.

● The data buyer submits the criteria for credit history.

● The smart contracts identify and verify the potential data based on the data owner

control criteria.

● The blockchain engine filters the data and returns the results.

● Usage Examples: Credit Dream is a Brazilian mobile blockchain platform that

connects lenders and borrowers in any country for affordable and verified loans.

Luminous is a New York-based startup that provides blockchain technology

 financial services so that business owners can securely share their data to get a

loan, find trusted partners, or manage a portfolio or network.

7. Hedge Funds

A hedge fund is an investment partnership consisting of a fund manager and a group of

investors (limited partners). However, hedge fund participants are traders rather than

ordinary investors. The purpose of a hedge fund is to maximize investor returns and

minimize risks. According to Autonomous NEXT, the number of hedge funds that trade

cryptocurrencies has doubled between October 2017 and February 2018. However, one

should distinguish between the traditional crypto hedge funds and decentralized crypto

hedge funds.

● Usage Examples: Examples of decentralized crypto hedge funds are

Alphabit Fund, Blocktower Capital, CoinShares, Crypto Asset Fund, and many

others.
 CRITICAL ANALYSIS (PROS AND CONS) OF THE BLOCKCHAIN

TECHNOLOGIES IN FINANCE INDUSTRY

Blockchain Pros

● Trade Finance:

Another area where blockchain is expected to have a significant impact is in trade

financing. All financial activities relating to international trade and commerce are

referred to as trade finance. Did you know that invoices, letters of credit, and bills

are still used in many trade finance transactions today? Many order management

systems allow you to complete this task online, but it takes a long time.

Blockchain can provide a tamper-proof digital ledger that can be used to track and

verify financial transactions. It can also enable faster and more secure cross-

border payments, reduce fraud, and increase financial inclusion for those who
 lack access to traditional banking services.

● Disintermediation:

First of all, with blockchain, you get a distributed system. It means that it gets rid

of any middlemen from your system. But how is that an advantage? In reality,

middlemen tend to be the third-party source that connects you to your services.

However, in the business world, from every service the middlemen offer, they get

a cut. In reality, a small amount of payment might not seem like much, but it does

add up when your service requires a 10-15 step process.

Other than that, there’s no way of knowing whether the middlemen would be

honest with their services. In reality, corruption runs deep, and in many cases,

these intermediates tend to abuse enterprises and consumers for their personal gain.

Thus, by getting rid of them, the whole trust issue is solved.

● High-Quality Data

Blockchain technology offers a superior level of data quality. In reality, it is a

distributed ledger system where it stores data. But how does it provide high-quality

data? Well, you need to know that low-quality data would not convert into high-

quality data within a night. That’s not how it happens.

Anyhow, this distributed ledger technology offers a consensus process that allows

you to filter out any bad data with useful data. It means that no one can just add

any kind of information on the ledger or even manipulate the existing ones.

So, when every piece of information is being verified before getting added to the

ledger, it will eliminate any false data.

 Moreover, it also gets rid of the issues that come from human-made errors. As

every single piece of information is verified, there’s no scope for a human-made

mistake. Thus, it significantly increases the quality of data.

● Durability and Security

Blockchain offers durability at its best. You could think of it as the internet

where there’s built-in robustness. In reality, the overall structure of the technology

makes it so durable. Moreover, as it stores blocks of information around the

network, it makes sure that there is no single point of failure or any single entity

controlling it.

This quality makes the system inherently durable. More so, as no one can alter the

blocks, it remains to be a solid secured platform. Other than that, it’s quite efficient

in fending off hacking attempts as well. So, there’s little to no possibility of

overpowering this network.

● High Level of Integrity

Another great advantage of blockchain is the level of integrity. Compared to any

other network systems out there, blockchain offers the highest level of integrity so

far. But what does it mean? In reality, it means that all your data will always be the

right one, and no one can alter them once it’s on the ledger.

More so, the process of storing the information and consensus processes is also

robust. Moreover, any user can’t just make changes to the verification as he/she

pleases. Thus, it would offer accurate and reliable data every single time when you

transact or store any other information. On the other hand, every blockchain’s hash
 ID plays a huge role in maintaining this property.

● Immutability and Transparency

For the next advantage in this blockchain pros and cons guide, we’ll be elaborating

on transparency and immutability. Blockchain comes with an immutable storage

system where you can’t change any single form of data or let alone delete them

completely.

In reality, cryptographic hashing plays a huge role in maintaining an immutable

structure. As every single block will have a Hash ID, any changes to that block’s

data would change the ID drastically. And it’s impossible to recreate the same

Hash ID again.

Thus, if anyone tries to change the data, all the other users would notice it right

away. Anyhow, most of the ledger system on this technology is also open for

everyone to see. Even in private blockchains, there is common ledger information

that anyone can see anytime.

● Longevity and Reliability

Another great advantage in this pros and cons of blockchain guide is the data

reliability and longevity. As you already know, blockchain is immutable,

transparent, and offer integrity. All of these characteristics result in the reliability

and longevity of the technology.

Furthermore, as no one can just change the rules of the blockchain as they please, it

remains intact. More so, as it can offer viable solutions for various business issues

for the long term, it becomes a reliable technology.

 Many enterprises are already considering altering their legacy networks with

blockchain for the long term.

Blockchain Technology Cons

● Redundant Performance

In reality, the computation needs of this technology are more repetitive than

centralized servers. It’s because every time the ledger is updated, all the nodes

need to update their version of the ledger as well.

It’s because the distributed nature of the ledger system mandates that every node

should have a copy of the ledger system. Thus, it needs to undergo the same

process over and over again.

● Complex Signature Verification Process

Another con of blockchain is the signature verification process. Basically, for

every transaction in the system, you’ll need a private-public cryptographic

signature verification.

It then uses the ECDSA (Elliptic Curve Digital Signature Algorithm) to ensure that

the transaction happens between the correct nodes. Thus, every node needs to

verify the authenticity of the user, which can be a tricky and complex process.

● Private Keys

To transact on the network, you’ll need to own a private key. Even though other

users can see your public key, a private key is much more crucial as it remains

hidden. Furthermore, all the blockchain addresses will have a private key.

You need to keep your private key secured by any means if you don’t want other
 people to misuse your assets. However, if you lose your private key, you’ll lose

access to your funds on the network, as well. There’s no way to recover them

anymore.

PESTLE ANALYSIS

A PESTLE analysis of blockchain technology in the finance sector would examine the

political, economic, sociocultural, technological, legal, and environmental factors that could

impact the adoption and implementation of blockchain in finance. For example:

Political: Government regulations and policies around digital currencies and blockchain

technology can impact adoption and implementation. . Regulators globally have raised the

alarm over cryptocurrencies, saying they may aid money laundering and terrorist

financing, hurt consumers and undermine trust in the global financial system. Such

concerns over security as well as criminal use of cryptocurrencies lead to widespread

government opposition and regulation. However, due to the decentralized nature and lack

of power structures inherent in cryptocurrencies, many view regulations could stabilize

the market in order to drive adoption and growth and reduce the volatility that has been a

hallmark of the industry. Regulations will offer greater legitimacy and give users and

institutional clients the confidence to invest.

Economic: Blockchain technology has the potential to reduce transaction costs and

increase efficiency in financial transactions, which can have economic benefits. “In

cryptography we trust”, undoubtedly trust is the single most important element in the

banking industry, and thus why they exist. Amid G20 summit 2018, the ministers and

central bank governors were warned that cryptocurrency could threaten international

financial stability with greater use and interconnections with the rest of the financial

sectors. Crypto assets raise a host of issues around consumer and investor protection.

Cryptocurrency dangers also come from their use to shield illicit activity and for

money laundering and terrorist financing. With the above-mentioned concerns,

Financial Stability Board Chair Mark Carney urged the finance ministers to lessen the

risks by working together to improve conduct, market integrity and cyber resilience in the

cryptocurrency sector (Terzo, 2018(a)). Without these improvements, the G20 advisory

unit chief cautioned confidence in the global financial system could shrink if

cryptocurrency use and interconnectedness become commonplace and threats appear

(Knutson, 2018). Will cryptocurrency eventually substitute the current financial market,

or will it work out to improve.

Sociocultural: The adoption of blockchain technology in the finance sector could be

influenced by societal attitudes towards new technology. For example, some people may
be hesitant to adopt blockchain-based systems because they are unfamiliar with the

technology or have concerns about its security. Additionally, some people may be

more likely to adopt blockchain-based systems if they perceive them to be more secure

or trustworthy than traditional financial systems.

Technological: Advancements in blockchain technology can impact the development and

implementation of blockchain-based financial systems. . The transparency and security of

data stored in a blockchain facilitate trust and efficiency between users in an

unprecedented way. Marie Wieck, IBM’s general manager of blockchain, indicated that

Blockchain has its origins in digital transformation and disruption, it is the answer to the

2008 financial and mortgage crisis. A rather interesting note is that most people focus on

blockchain’s initial entry point and use case, Bitcoin. They associate anything blockchain

with Bitcoin and that is not right. There is much more to blockchain than Bitcoin and

cryptocurrencies. Currently IBM is working on its Hyperledger project on food-chain

safety and digital identity. One of the biggest disadvantages of having a centralized data

storage system is the risk of data breaching of consumers’ private info. Equifax, one of

America’s three major credit reporting agencies, announced back in September 2017 that

their system had been breached, exposing information of approximately 143 million

consumers, the affected data included sensitive materials such as Social Security

numbers, driver’s license numbers, and even credit card numbers (Bernard, 2017). This is

where blockchain technology kicks in, to help build the infrastructure needed to prevent

these types of breaches.

Legal: Legal frameworks around digital currencies and blockchain technology can

impact adoption and implementation.

The energy consumption of blockchain technology can impact its sustainability and

environmental impact Reduce Remittance cost and protect own assets The case of Bitcoin

in Africa highlights several interesting elements, cryptocurrencies and mobile transfers

have created an opportunity for people in Africa to control and protect their assets. In

countries where there are political crisis and economic turmoil, people live in a chaos,

which in turn caused them to lose their trust to the government and the financial

However, this would prove to work against the idea of distributed systems. By cutting out

the middleman, the cost of remittance can be drastically reduced as well as the hassle

required to receive international money transfer. This eases the life of those in the

developed world, at the same time it provides a platform for illicit uses of money transfer.

Environmental: The use of blockchain technology in the finance sector could have

positive environmental impacts by reducing paper usage and increasing efficiency. For

example, blockchain-based systems could reduce the need for paper-based

documentation, which could reduce deforestation and other environmental impacts

associated with paper production. Additionally, blockchain-based systems could reduce

the need for intermediaries, which could lower energy consumption and other

environmental impacts associated with traditional financial systems.

 CONCLUSION

After conducting an industry analysis and literature review on the role of blockchain

technology in the finance industry, the following conclusions can be drawn:

• Blockchain technology has the potential to revolutionize the finance industry by

addressing key challenges such as security, efficiency, and trust. It provides a

decentralized and transparent system of record-keeping that reduces the risk of

fraud and errors.

• In the payment systems realm, blockchain-based cryptocurrencies have disrupted

traditional methods by offering fast, low-cost, and borderless transactions. The

use of smart contracts enables programmable payments, automating processes

and reducing the need for intermediaries.

• The application of blockchain in banking can streamline operations, enhance

transparency, and improve security. It allows for faster and more secure cross-

border transactions, reducing reliance on intermediaries and lowering transaction

costs. Blockchain-based identity verification systems can also improve customer

onboarding while ensuring data privacy and security.

• Blockchain has the potential to transform trade finance by digitizing trade

documents, automating processes, and providing real-time visibility into the

movement of goods. This can lead to increased efficiency, reduced fraud, and

streamlined trade financing. Smart contracts on the blockchain can automate

payment settlements based on predefined conditions, eliminating paperwork and

 improving overall efficiency.

• In asset management and capital markets, blockchain enables the tokenization of

assets, fractional ownership, increased liquidity, and improved accessibility to

investment opportunities. Peer-to-peer lending platforms built on blockchain can

eliminate the need for traditional financial intermediaries, making the process

more efficient and cost-effective.

• However, challenges remain for widespread blockchain adoption in the finance

industry. Scalability, interoperability, and regulatory frameworks need to be

addressed to ensure seamless integration into existing financial systems.

In conclusion, blockchain technology holds immense potential in transforming the

finance industry. Its applications in payment systems, banking, trade finance, asset

management, and capital markets are disrupting traditional practices and unlocking

new possibilities. As the technology continues to mature and regulatory frameworks

evolve, blockchain is expected to play a significant role in shaping the future of

finance, driving innovation, and fostering greater financial inclusion.

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