Blockchain Threatens the Global Banking System According to Latest Moody’s Report

Biggest impact on Swiss banking industry generating 50 percent of revenue from fees and commissions

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The Moody’s Investors Service report shows the protentional of Blockchain with cost efficient transactions to challenge large banking systems. According to the report Switzerland is the country with the highest impact, as Swiss banks generate 50 percent of revenue from fees and commissions.

Blockchain technology has proven its capability to reduce the transaction costs and time including banking fees and commissions. However, the positive side of Blockchain is that it makes cross-border transactions much more efficient and less expensive;

While making cross-border transactions faster and less expensive would be credit positive for banks, these efficiencies could also compress their fees and commissions, a credit negative.

Moody’s Investor Service report outcomes

Countries with largest fees and commission income shares from revenue

Source: Moody’s Investor Service

Blockchain technology creates a permanent and secure record of transactions occurring between two parties. This makes it no longer required to have a third-party intermediate involved in the transaction. The first application of blockchain was tested on Bitcoin. Banks are now in the process of investigating in improving cross-border payment transaction processing time. Then blockchain could reduce the time from days to just a few seconds for a transaction to complete.

Switzerland is sensitive to this part of Blockchain technology as well. It ranks third on “banks handling most cross-border transactions relative to GDP”, according to Moody’s report. The report excludes outliers Luxembourg and Hong Kong. United Kingdom holds the rank one position, while Belgium follows up in rank.

Nevertheless, Switzerland famous as an international banking hub in the world, has a very friendly approach towards blockchain and cryptocurrency enthusiasts. The Zug region has already got an alias as “Crypto Valley” due to the large number of cryptocurrency businesses active from there.

Earlier in July 2017, financial market regulator of the country approved the first Swiss private bank dedicated for bitcoin asset management. This gave motivation for global banks in other countries to make the same approach.

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