Issue link: https://maltatoday.uberflip.com/i/776046
maltatoday, SUNDAY, 22 JANUARY 2017 IV Business & Finance being used in the US and Estonia to prevent the theft of pills through the supply chain and give medical history ownership back to patients – who can distribute it to their doc- tors, for certain amounts of time, as they want or need. In the health sec- tor, blockchain is being considered as a solution to the counterfeiting of drugs. In the food and drink industry, farmers could use blockchain to monitor their crops – and trace where and when food recalls occur. Blockchain will also alter the legal landscape primarily through its use for smart contracts – self- executing contractual states, stored on the blockchain, which nobody controls and which are immutable – and which therefore everyone can trust. Smart contracts can be pre-programmed with the ability to self-execute and self-enforce themselves. Identifiable legal industries that are seeing an active use of blockchain technology and smart contracts include IP, land registry and deed management. Some Latin American countries, for example, have already begun to use block- chain as a means to keep track of who owns which land deeds. A number of African countries are considering using blockchain tech- nology to keep census information. Voter records could also be added to this process as a means to have a central repository of eligible citi- zens. In this area, which is currently under development, blockchain seems primed for tremendous growth. Whilst digital currency applica- tions are the best known to date, banks and financial services have been at the forefront of identifying new applications of blockchain to re-engineer processes as well as developing new business models to deliver their services. The most prominent is the R3 consortium, which includes over 70 of the world's largest financial operators and which researches and develops blockchain usage within the finan- cial system. The insurance industry could also change dramatically. The sector is employing blockchain technology when registering luxury assets to help prevent theft and fraud. One project – which involves Interpol, insurers and diamond distributors – is working to stem the flow of 'blood diamonds' into the precious- stones market. Another projects is looking into the use of blockchain to provide the opportunity for in- dividuals to get insurance that lasts for a few hours, such as sports in- surance. Fraudulent claims, manual processes, fragmented data sources, policies for one user sitting in silo and legacy underwriting models are some of the biggest challenges experienced in the insurance sector today – all causing low customer satisfaction. Creating policies as smart con- tracts on the blockchain is an ideal use case for insurance. It offers complete control, transparency and traceability for each claim and could lead to automatic pay-outs. Blockchain technology would also improve risk modelling for the sector, break down the existing silos and significantly reduce fraudulent claims by capturing the origin and ownership of diamonds, paintings, homes, cars and other assets to be insured. Asset management will also be a key beneficiary of the blockchain. Traditional trade processes within asset management can be slow, manual, cumbersome and filled with risk when reconciling and matching – and they're getting more complex with cross border transaction and for non-standard investment products, such as loans. Each party in the trade lifecycle (e.g. broker dealers, intermediaries, custodians, clearing and settle- ment teams) currently keeps their own copy of the same record of a transaction, creating significant inefficiencies and room for error. Blockchain technology simplifies and streamlines this entire process, providing an automated trade lifecycle where all parties in the transaction would have access to the exact same data about a trade. This would lead to substantial in- frastructural cost savings, effective data management and transparen- cy, faster processing cycles, minimal reconciliation and the potential removal of brokers and intermedi- aries altogether. So what is the way forward? It is clear that blockchain is of greatest use in scenarios where various par- ties are involved within a common practice or transactions, and where such parties have traditionally required a third party to act as a central authority to either negotiate, verify or process the transaction. However, the initial investment for such parties to shift to blockchain – in terms of time, budget and resources – can appear prohibitive. In addition, the number of available technologies, tools and frameworks is increasing, making the choice more time-consuming. For start-ups and individual busi- nesses, without access to a client base, the expertise to navigate the regulations and licensing of the finance industry, client confidence, and robust global infrastructure, these new entrants can only go so far on their own. Collaboration be- tween incumbents and new players will be essential to fully comprehend the effects (both positive and nega- tive) of technological developments. In order to work together to shape a new future, the various industries and stakeholders need to take a collective view on the potential of the technology. They must embrace this potential, show patience with its development and invest in various innovative solutions to bring it to bear. It is up to major established players in the market to work with innovators to develop standards, while also preserving the existing strengths of the ecosystem, and navigating the complex worlds of regulation and legal oversight. There is also the need for the crea- tion of fora that educate regulators and the business community on the opportunities and risks. One will also require collection and assessment of best practices. A database should be set up to track and evaluate these applications and to provide the necessary empirical evidence on which sound policy making can be based. Investment in blockchain technol- ogy should not come only from the private sector or from direct stakeholders. Government and authorities should also be spurring innovation through co-financing and non-financial means. For more information on blockchain or how you or your business can benefit call on 21 320 134 or email grantthornton@mt.gt.com. Web: www.grantthornton.com.mt 'Blockchain technology's potential lies in its ability to create a distributed ledger of transactions, in a secure manner without a central coordinating body.'