3 Ways Blockchain Could Revolutionize the FX Industry
The inevitable meeting of global transactions on a peer-to-peer network
As blockchain and cryptocurrencies have become widely adopted over the last several years, the jury is still out on the relationship between them and foreign exchange. Forex has a lot to gain from blockchain technologies, and it is likely that we will see them grow closer together over time. Here are 3 ways blockchain can enhance the forex industry.
1. Greater Transparency
Debatably the biggest benefit of the adoption of blockchain technology in the FX industry is the greater amount of transparency we will be seeing in the near future. Given the nature of a peer-to-peer network such as blockchain, it is likely we will see the elimination of intermediaries such as brokers and other financial institutions. In return, trading will become fully reliant on the blockchain, and therefore more transparent.
The distributed ledger that characterizes blockchain has higher transparency and security for registering records than the current forex methodology. These cannot be altered or changed by any individual, which means that laws, currency quotes, regulations, transactions, etc. will all be secured in a reliable and immutable way of registering transactions and currency movements.
If the FX industry were to widely adopt blockchain technologies, it could in theory create its own, decentralized and completely transparent database. This would allow for information on each transaction to be readily available at all times to any individual who wants to inquire about it.
2. Increased Accessibility
The need for brokers and other intermediaries has made it difficult for certain individuals, startups, and small businesses to get involved quickly and easily with trading. By trading on the blockchain, it gives individuals and companies the ability to exchange money peer-to-peer rather than going through central banks, something that could really change the way the industry operates.
3. Enhanced Security
The final way blockchain could disrupt the Forex industry is by offering higher security levels for traders, banks, and every element involved. For every transaction that occurs, blockchain technology ensures that records and sensitive information and will remain secure. Large amounts of money can be moved around without influencing or affecting currency prices which can be a huge advantage in several cases, but the model also has some vulnerabilities such as human error and easily manipulated trading accounts.
Blockchain has the potential to change these vulnerabilities for the better and can offer extra security to all traders, no matter their buying power.
While the exact timeframe for pairing forex to blockchain is unclear, there are distinct benefits that blockchain technology can offer. Between transparency in transactions, increased accessibility, and greater security, the forex industry has a lot to gain once it decides to let go of its traditional financial model and move into the future of finance.