Good Day Readers! In this article, I would like to share my idea on how Blockchain Technology helps to resolve or address Regulatory and Compliance challenges. I am confident that if you understand the Blockchain Core Concepts and Regulatory Authority Usecases, any System Architect can provide precise solution for all Regulatory and Compliance Risks. I want to start this article by elaborating Regulatory Ecosystem in Blockchain Technology and then I would like to couple of usecases.
For understanding this article, you should have basic
knowledge in Blockchain Technology (You must have gone through my previous
articles) and how Regulatory Body impacts various industries like Healthcare
and Finance.
Ecosystem
Regulatory is a common term which is applicable for any
industry which requires a central authority to monitor and control. We can
broadly classify these organizations into two categories.
- Industry Players
- Regulatory Authorities
Industry Players are who running business in specific industry
which is directly or indirectly consumed by common people. Healthcare Provider Organizations,
Pharmaceutical Industries, Banking and Financial Firms are few examples of
Industry Players. Regulatory Authorities are the board which is owned by
government or private organizations. Their core responsibility is to issue
regulations and compliance requirements and regularly monitor their Industry
Players. Examples are Department of Health and Human Services (HHS), National
Association of Insurance Commissioners and Securities & Exchange Commission.
Nature of Blockchain Technology addresses the most of the
current challenges faced by Industry Players and Regulatory Authorities. For
better understanding, let’s discuss further about Blockchain uniqueness.
- Blockchain removes the trust on Central Authority who can either be a person or organization by replacing Technology
- Data in Blockchain are Tamper-Proof or Immutable
- High Availability in nature comparing with other technology in the industry
- Blockchain Transactions are auditable at point of time and any level
There are lots of advantages in Blockchain but I gave few lines
for understanding Regulatory related usecases. Here is my Regulatory Ecosystem
in Blockchain Technology.
There are 7 regulatory components provided in this Ecosystem
but why? If you have initial understanding on Blockchain and Regulatory, you
may assume that Compliance and KYC components are enough to go with regulatory
requirements. Yes. It is true. But the fact is little different when you
consider all usecases of Industry Players and Regulatory Authorities. First we
can see the brief description of all components.
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Compliance
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Issuing or adhering certain regulations or directives. You have to
think all modules required for
compliance issuers and followers
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KYC and Authentication
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Any user comes into Blockchain Network needs to complete all
onboarding process but data should be maintained in the Blockchain network itself
as Transactions
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Smart Contracts
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Digital Agreement between two or more parties to automate end-to-end compliance
requirements and verification on-time.
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Crypto and Cyber Security
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All transactions like Regulatory Reports, Verification Statements and
User Details should be encrypted by Cryptography Algorithms.
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Decentralization
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Peer-to-Peer connection between multiple server nodes and
Peer-to-Peer connection between all Blockchain Users. It means that
Blockchain network does not depend on singe data source.
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Digital Identity
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Connectivity parameters to all Blockchain users like Compliance Issuers,
Followers, Mediators and Network Administrators
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Arbitration
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Common authority who can be either computer program or mining
organization who resolves the conflicts in the transactions
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The Fact is just to revamp the entire regulatory framework
using Blockchain Technology. For doing this change, the followings should be
considered.
- No More Regulatory Authority – All existing and new regulations should be issues are Smart Contracts in Blockchain Network
- Public Blockchain Network – Make all transaction into public with strong cryptography algorithm which enables transparency in the industry
- Powerful Consensus – Electronic Arbitration and Verification solution is required to avoid manual influence in Blockchain Network. Few combined algorithms must be chosen like ‘Round-Robin with Proof-Of-Work’ to ensuring consensus
I am sure it won’t happen immediately to replace either Regulatory
Authorities or Industry Players with Blockchain Technology. But before
considering giant regulations like HIPAA, CMS, SEC and ESMA, this concepts can
be implemented in small and medium level organizations with regulations like
Organization Records Management, Payroll and Transaction Management and
Internal Compliances. Apart from Bitcoin and Ethereum Networks, many Blockchain
Software are available in the industry like Openchain and Hyperledger which can
be customized based on your organization needs.
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