pub-readyRegulation & Compliance


Blockchain Use Case for Legislation, Compliance, & Regulatory Oversight

Key Takeaway: Blockchain could eliminate common problems for both compliance officers and regulators, such as a lack of reliable access to real-time data, while reducing overall costs associated with complex regulatory processes.

Information can be captured immediately and transparently within a distributed ledger. This capability, when combined with a blockchain’s cryptographically assured immutability and irreversibility, has the potential to fundamentally revolutionize many business and regulatory processes as well as bring great benefits to the compliance industry as a whole. Distributed ledger technology could make data more available and secure while stripping out waste associated with delays, errors, and rework.

Here are a few real-world examples that illustrate the legislative, compliance, and regulatory uses of blockchain technology:

#1: Proof of process for compliance purposes

Companies in certain industries, such as financial services, mining, and energy, are required by law to maintain secure records of their due diligence and safety processes for compliance proposes. A blockchain could be used to record important actions taken by an organization and their outputs immutably in real-time, creating a near-perfect audit trail for regulators and other third-parties to verify compliance.

#2: Real-time regulatory oversight

Government agencies in the United States are required by law to follow the procedures set forth by the Administrative Procedures Act. According to this act, regulatory agencies must take due process and other considerations into account during enforcement actions. Enforcement can be challenging because individuals, businesses, and other organizations are granted the power to protest the validity of administrative rules, defend themselves inside or outside of a courtroom, and seek review of administrative findings. To further complicate matters, regulators often have limited access to needed information for monitoring and compliance purposes. They are, primary, limited to a post-hoc review of the “evidence.”

A blockchain could provide compliance officers with real-time access to a variety of business functions for monitoring processes, allowing them to consistently ensure compliance with a specific regulatory requirement via an accessible and immutable audit trail. This would also allow compliance officers to expedite the verification and validation processes associated with such audit trails.

A blockchain could likewise provide regulators with read-only, real-time access to financial institutions private records. Third-party agencies, or for that matter internal corporate compliance officers, could set up automatic triggers that alert them when the company does not meet certain regulatory requirements. This would give them the ability to more effectively analyze information and records as they are created, instead of in a post-hoc manner. It would also dramatically reduce the time, effort, and costs associated with regulatory reporting, as well as generally improve the confidence of and in such processes.

#3: Faster identity checks for screening and compliance

A blockchain could be used to establish a digital identity management grid to enhance screening and compliance operations. This would be achieved by inputting all necessary information about individuals, firms, and other parties into a private chain and allowing for simple automated checks against that information. This would allow organizations, particularly in the financial sector, to more easily establish trust and more securely share sensitive information about customers.

#4: Government bonds

Earlier this year, the Queensland Treasury Corporation and the Commonwealth Bank of Australia became the world’s first organizations to experiment with the issuing of government bonds via a blockchain. Although no bonds were actually issued by either organization, the trial showed great promise for real world applications. A blockchain could be used in a similar manner to provide the issuer with real-time insight into current bids and would allow them to set up automatic coupon payments to bondholders via the use of smart contract technology.

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