Digital Currency and Blockchain Technology in the Financial World

Introduction Of Blockchain Technology

The concept of Blockchain was first introduced by Satoshi Nakamoto (Nakamoto & Bitcoin, 2008). According to Biais et al. (2019), it is described as a multifunctional and multiusable programmable framework that has been employed to regulate ownership and financial transactions. It is the revolutionary technology that reveals super boom inside a short time interval. Blockchain technology is a based on DLT (Decentralized Distributed Ledger) that keeps track of all a digital asset's transactions (Reiff, 2020). It has drawn a lot of interest from academics, teachers, business professionals, and investors. The exponential growth of digital currency has been extensively demonstrated due to this technology. Due to the fact that this currency has been the main focus of study into financial regulation, security, monetary policy, privacy, and many other topics, this sector is in higher demand (Reid & Harrigan, 2013; Peters & Panayi, 2016). Each coin has two sides. This technology has its own advantages and disadvantages. Immense benefits can be availed by the users on one hand and on the other hand, this technology poses a significant risk to the banking industry as well. The Indian banking industry is being impacted by this technology for the reasons listed below-

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  Reducing Fraudulent Activities: Blockchain technology provides protection to banks against fraudulent activities. Implementing this technology into the system is considered essential since fraud is growing at a much faster rate. (Andolfatto, 2018).

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  No Intermediary: Disintermediation is the backbone of blockchain technology, that reduces transaction costs. Due to its being built on a decentralized process, no central authority control is necessary.

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  Add-On Customer Base: Customers are well equipped with the technology know how and they are developing in a technologically advanced setting. It has huge potential for new innovations in banking industry so as to provide better services to customers. If blockchain technology is used in the financial industry, this may be achievable.

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  International Business Transactions: In order to make international business transactions easier, more paperwork is required for processing documentation like letter of credit, export documentation, export billing, pre and post shipment financing, factoring, etc. It will become more efficient with the introduction of blockchain technology.

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  Save Transaction Costs: Blockchain technology provides the ability for rapid, paperless financial transfers. The transaction is free of additional costs. Therefore, this technology may enable banks to cut transaction costs (Grima et al., 2021; Zheng et al., 2017).