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Bank of Valletta discusses Distributed Ledger Technologies in Banking
27 Jul 2018

Kenneth Farrugia, Chief Business Development Officer, discussed the opportunities and threats posed by Distribution Ledger Technologies in Banking. Mr Farrugia was addressing participants during the Information Session on Blockchain legislation organised by The Malta Chamber of Commerce, Enterprise and Industry in collaboration with EMCS at the Exchange Buildings in Valletta on the 26th July.

Among the alternative routes taken by banks who choose to embrace Distributed Ledger Technologies, Mr Farrugia highlighted banking settlement system, customer identification and KYC solutions, payment solutions, trade finance and syndicated loans.

“Cost savings and improved customer service are clear benefits for those areas of banking where distributed ledger technologies such as digitalisation, faster transaction handling and improved KYC are applied,” explained Kenneth Farrugia. However, he cautioned about the importance of studying the challenges posed by every solution. “For instance, KYC requests may cause delays in processing banking transactions and result in duplication of effort between banks.” Referring to the costs involved, Mr Farrugia mentioned the Thompson Reuters (2016) survey which claims that KYC costs average an estimated USD 60 million. “Financial regulators are another important variable to consider. To what extent will financial regulators be willing to accept that Distributed Ledger Technologies meet Anti-Money Laundering and GDPR legal and regulatory requirements?”, he asked.

Payment solutions proved to be another fertile ground for discussion. “The scalability issues of the most popular blockchain networks today are well known, along with the time required to confirm a transaction.” Presently, scalability and privacy issues are among the key challenges faced by distributed ledgers to process cross-border payments,” stated Mr Farrugia.

“Among the most common challenges running across all solutions, the need for a clear regulatory environment, coupled with the operational barriers that may lead to a defragmented market and cultural barriers are the most apparent,” explained Mr Farrugia. “It is critical to address these issues in order to facilitate communication between fintech players on the one hand, and the conventional banking players on the other,” concluded Mr Farrugia.

Other key note speakers who participated in this session included Hon. Silvio Schembri, Parliamentary Secretary for Financial Services, Digital Technology and Innovation who gave an outline of the blockchain legislation which has recently been approved by the parliament. Mr Gordon Micallef, Partner at RSM Malta gave an overview of the Malta Digital Innovation Authority Act and Innovative Arrangement and Services Act, while Mr Christopher P. Buttigieg from the Securities and Markets Supervision Unit at the MFSA discussed the Regulator’s role on the VFA Bill.  

 

 

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Bank of Valletta p.l.c. is a public limited company regulated by the MFSA and is licensed to carry out the business of banking and investment services in terms of the Banking Act (Cap. 371 of the Laws of Malta) and the Investment Services Act (Cap.370. of the Laws of Malta).