BASEL, Switzerland—Using distributed-ledger technology (DLT) to cut the cost of cross-border payments requires regulators to stop looking at individual entities like banks, and start looking at the whole decentralized network, according to one new analysis.
The recommendation was included in a working paper produced for the Bank for International Settlements (BIS) here, CoinDesk reported.
According to CoinDesk, international standard setters are hoping to streamline current clunky and expensive systems for cross-border remittances – but to “unlock the potential of blockchain-style tech, first they may need to turn away from rules that traditionally assume a single central player is in charge.”
“Enhancing cross-border payments is a multifaceted problem requiring a comprehensive approach, and DLT could be one way of addressing these inefficiencies,” states the working paper, written by a team led by University of Luxembourg professor Dirk Zetzsche, CoinDesk reported.
‘Isn’t Easy to Shoehorn’
However, “financial law traditionally assumes that functions are concentrated in a single entity,” the paper states
“Traditional financial regulations are focused on institutions such as banks, and it isn’t easy to shoehorn blockchain payments or smart contracts into that model,” CoinDesk added. “In practice, regulators tend to look for intermediaries on to whom obligations such as anti-money laundering checks can be piled, for example those providing crypto exchange or wallet services.”
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