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Blockchain tipped to curb illicit money

Bitcoins displayed on a screen. AFP PHOTO | NMG
Bitcoins displayed on a screen. AFP PHOTO | NMG 

The global blockchain technology could help financial institutions fight money-laundering and corruption that are prevalent in cash economies, a new report suggests.

The findings by Economist Intelligence Unit (EIU), the forecasting and advisory arm of Economist Group, show this is possible as the transactions cannot be tampered with without overwriting all the data in the system.

This is besides reduced money-transfer and exchange costs as they don’t require intermediaries and government regulations, EIU says in ‘‘The Next Frontier:  The future of finance in the Middle East, Africa and South Asia’’ report released on Tuesday.

Blockchain is a ledger of online transactions such as the transfer and ownership of cryptocurrencies —a form of digital cash whose generation and verification is regulated by encryption of techniques.

This is unlike conventional currencies whose production is overseen by central banks.

“While these applications are experimental and pose regulatory difficulties, the core technologies can help to overcome some of the challenges of the existing financial system, such as money-laundering and corruption in a cash economy,” EIU says.

“More importantly, they are expected to reduce costs for financial institutions, particularly around compliance with anti-money-laundering (AML) and Know Your Customer (KYC) rules.”

The Central Bank of Kenya in December 2015 warned financial institutions and general public against use of Bitcoin – a form of digital currency whose popularity is growing by day– saying it will not be liable for losses arising from such transactions.