The technology behind bitcoin virtual currency could lead to across the board improvements in how financial transactions are carried out worldwide. Federal Reserve Governor Lael Brainard believes it can be a safeguarded from hackers and terrorists, and not grind to a halt in a crisis. Though the Fed is closely tracking the evolution of so-called blockchain systems, and sees it as "the most significant development in many years in how financial assets trade hands. There is the potential of distributed ledger technology, or blockchain, to transform the way financial market participants transfer, store, and maintain ownership.
The Fed along with major central and commercial banks around the world are grappling with how blockchain may reshape the financial system. Such technology in theory could lower the cost, improve the security and speed the completion of transactions by eliminating intermediaries. It would instead rely on cryptography and computer algorithms to transfer electronic records across a shared ledger. Brainard said "common ledgers could simplify the complicated cross-border record keeping involved in trade finance, lower counterparty risk in securities transactions, or even automatically enforce bond payment or other contracts". The downside is that it would need to prove itself immune to hacking or other security breaches, use by criminal organizations, and show that it could improve - or at least not damage - financial stability.
Although most applications are in their infancy, and the industry may still be several years away from an application that is ready to be fully introduced. The Fed expects to release a research paper on the technology later this year. Initial relatively simple proofs of concept must be followed by much more complex demonstrations in real-world situations before these technologies can be safely deployed in today’s highly attached, intergrated, and far-reaching financial business.
More at:
http://www.ttm.news/2016/10/12/lael-brainard-views-blockchain-as-progressive/