A number of leading financial institutions have expressed fears that cryptocurrencies such as bitcoin could play a potentially disruptive role in the world's financial sector.
Whilst industry analysts have claimed that banks could significantly reduce costs by implementing and integrated the new technologies within their systems, the gains could eventually shift to consumers who would benefit from quicker and much cheaper services.
Managing Director for credit strategy at Moody's, Colin Ellis expressed his fear over the impact the proposed adoption of the technology could have on the stability of the banking industry.
Ellis said, "Any disruptive shock - be it technological, economic or political - tends to result in winners and losers, and blockchain is no different. It could reduce costs for banks but at the same time could foster more competition that would put downward pressure on fees."
The promise of a shared encrypted ledger that cannot be manipulated offers the promise of secure transactions that enables anyone to get an accurate accounting of money, property or other assets. However, a recent report conducted by Moody's discovered that while blockchain technology could slash cross-border transaction costs for financial institutions, it would more than likely ramp up competition amongst banks.
Anish Mohammed, a cryptography expert and academic at Berlin University, told AFP that the losers would be those who failed to adapt to the latest technological trend. He said, "There will be winners and losers, the losers will be those who do not make any changes."
The world's biggest financial institutions are already experimenting with blockchain, although recent data indicates that they risk lagging behind other sectors in its use.
It has been projected that around $2.1 billion will be invested via blockchain globally in 2018, according to US-based consultancy IDC. One third of that will represent the financial services industry, IDC said.
Other notable sectors using blockchain include distribution and services, retail and professional services, and manufacturing and resources. Ellis added, "The technology is still at a relatively early stage, so it is too soon to know what the final impact will be. But it could ultimately make banking cheaper and quicker for consumers.”