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US Federal Reserve publishes its first report on blockchain technology

US Federal Reserve (Fed) has introduced its first major report on a distributed registry technology.

The paper discusses the possible scopes of application of technology in the financial sector, as well as the benefits and challenges associated with its implementation.

The document titled Distributed ledger technology in payments, clearing, and Settlement is prepared by the agency's analysts in cooperation with the Federal Reserve Bank of New York and Chicago.

"An important objective of the document is to examine the use of technology in the field of payments, clearing and settlement operations, as well as the identification of opportunities and challenges associated with its practical implementation and possible adoption in the long term," the report says.

Among the advantages of blockchain technology there are:

• reduction of the processes complexity (especially in the implementation of multilateral and cross-border transactions);

• increase in the processing speed between end users and the increased availability of assets;

• reduced need for synchronizing multiple storage environments;

• increased transparency and the immutability of the financial record keeping;

• increased network reliability through distributed data management;

• reduction of operational and financial risks.

The report also refers to the need to develop common standards to provide a basic level of interoperability between distributed systems and traditional financial infrastructure. In addition, emphasis is placed on the need to consider the effective management of cryptographic keys and credentials for access to distributed information, as well as the development of information validation rules before it is recorded in a distributed registry.

The authors raise the question of the need to bring the legal framework into line with the introduction of new technology in the financial market. As an example they cite BitLicense – a licensing system of the participants of cryptocurrency market operating in New York State since last year.

As analysts say, closed decentralized systems, which involve a more centralized management structure and are more accustomed to the traditional financial market participants, suit financial institutions best.

The study interviewed 30 representatives from the public and private sectors, which number includes both well-known companies and institutions, and blockchain- and financial and technical startups.

Recall that in October, board member of the US Federal Reserve Lael Brainard said that blockchain technology can have a significant impact on the existing financial system. At the same time the publication of this report was announced, and the Fed's intention to continue discussions with representatives of the technology industry was highlighted.

Source: forklog

  • December 7, 2016 3:19 PM MSK