The executive director of Bank of Japan (BoJ), Shigehiro Kuwabara, has pointed out the need for regular engagements in a bid to take action on threats
The executive director of Bank of Japan (BoJ), Shigehiro Kuwabara, has pointed out the need for regular engagements in a bid to take action on threats directed at the blockchain. Speaking during the third conference of the FinTech Forum, he said that failure to curb the threats could have catastrophic impact on the credibility of the technology and in so doing hinder its development.
Kuwabara’s speech tittled “Distributed Ledger Technology and Designing Trust” highlighted BoJ’s blockchain view as well as the issues of incorporating in the financial sector. He drew attention to the fact that it would be an important milestone to establish trust in the financial field compared to other industries. However, the director noted there was going to be some challenges in designing the blockchain and trying to incorporate it within the financial sector.
He went on to lay out three issues that were likely to be faced in designing a blockchain framework that can be trusted.
The first is guaranteeing resiliency during emergency situations. He cited the DAO hack that occurred last year, where hackers drew out a huge amount of cryptocurreny from a cryptocurreny-based investment after exploiting the vulnerability of the system. He added that to get back the money, the operator decided to roll back the payment records, which would not normally occur.
It is important for the blockchain systems to be resilient against possible threats that, as the director states, could negatively impact the development and growth of FinTech,’ as the technology’s credibility is put into question.
The second step is getting to understand the blockchain’s advantages and disadvantages.
The technology is innovative and has no doubt surpassed expectations in its rather short lifespan. However, the director believes that based on the system’s current level of the technology, it is yet to reach its full potential of outdoing the traditional centralized system.
Finally, Kuwabara points out that if the financial sector is to work well with the blockchain, a deep understanding of the technology has to be there first.
Right now, the blockchain core elements are developed by FinTech firms and IT vendors, outside of financial organization resources. However, if the finance industry is to reach greater heights with its services, the blockchain has to first of all understand the technology.
The Bank of Japan is dedicated to ensuring its advancement and economy with the blockchain. The bank will has begun serious considerations of digital currency despite earlier on saying at one point that bitcoin does not pose a great risk to fiat money. However, it is going to continue watching the developments of blockchain knowing it may have to call in FinTech in the future to help in its operations.