What can blockchain technology do for financial services in a favorable regulatory environment?
With the arrival of a new president in 2025, the ecosystem is about to find out. Donald Trump promised the industry that he – the United States Securities and Exchange Commission (SEC) under his administration – would be more friendly to cryptocurrencies.
In a context where traditional financial players are cold to the blockchain space, when banks discuss real-world crypto use cases, they tend to default to stablecoins for payments.
For example, on Thursday, November 7, UBS announced that it had created and piloted UBS Digital Cash, a blockchain-based payment solution, while a day earlier, on Wednesday, November 6, JP Morgan announced a significant improvement to its own solution. payment. blockchain platform, recently renamed Onyx to Kinexys.
But that’s not all that JP Morgan announced. The banking giant also released a white paper titled Project EPIC: Fueling Tokenized Finance with On-Chain Enterprise Privacy, Identity, and Composability (EPIC).
The article, as the title suggests, explores the use of blockchain technology to improve privacy, identity and composability within financial ecosystems.
“Our goal is twofold: to articulate the challenges and opportunities in this space and to catalyze industry-wide dialogue and action,” the bank said.
As the regulatory landscape evolves, this view appears to be increasingly prevalent among traditional financial institutions (FIs).
Learn more: A pro-crypto president: what Trump 2.0 has in store for the future of blockchain
Unlocking the full potential of tokenized assets
One of the main features of blockchain technology is transparency, a double-edged sword in finance. The open nature of blockchains provides a high degree of trust and visibility, allowing anyone to verify transactions. However, the lack of privacy poses a significant barrier for many potential users, particularly institutional participants who are reluctant to publicly share sensitive financial information.
In a world where sensitive financial data and transactions may be increasingly exposed to public scrutiny on-chain, there is an urgent need to address privacy and identity challenges in crypto.
According to the JP Morgan article, “the lack of mature on-chain cryptographic privacy solutions, coupled with the lack of consensus on implementing privacy-preserving digital identity, continues to create operational friction in interactions between tokenized assets. While these challenges are not entirely resolved – as demonstrated by the $2-3 billion raised through on-chain funds and approximately $200 billion in stablecoins, protocol hoards, and public chain lending protocols – the solving could broaden adoption.
In an interview with PYMNTS published on Friday (November 8), Raj Dhamodharan, executive vice president of blockchain and digital assets at Mastercard, explained that the true potential of blockchain can only be realized when users can interact with the network of reliable and verifiable manner. manner.
“But even though the underlying infrastructure allows you to transfer value, it doesn’t really lend itself to doing it in a very simple way,” he added, emphasizing that “experiments are difficult.”
As the latest PYMNTS Intelligence report revealed, regulated industries, including healthcare and financial services, must comply with numerous requirements, such as know your customer (KYC), anti-money laundering (AML) and data privacy regulations. Blockchain could help these industries in this regard.
Learn more: Visa, PayPal and others could bring utility and legitimacy to Stablecoins
How Solving Privacy and Identity Issues Could Expand Adoption
“Reusable, privacy-preserving digital identity solutions are fundamental to unlocking the full potential of tokenization, enabling streamlined onboarding, real-time verification, and programmable compliance,” notes the JPMorgan report.
However, this journey requires a collaborative effort from developers, regulators and industry stakeholders to ensure these solutions are both technically feasible and regulatory compliant.
In the short term, the dynamics of stablecoins, protocol treasuries and on-chain lending demonstrate the viability of the system.
PYMNTS recently spoke with Ran Goldi, senior vice president of payments and networks at Fireblocks, and Nikola Plecas, head of marketing at Visa Crypto, to analyze the benefits and myths surrounding blockchain-based payments, how thinking about real-world applications and how to unlock new revenue streams using blockchain. Stablecoins, panelists said, offer advantages over existing payment systems, including native programmability, strong auditability, rapid settlement, self-custody options and seamless interoperability.
However, as tokenization becomes more integral to the financial sector, privacy and identity will move from being “nice-to-have” requirements to essential ones. Meeting these needs will be essential to fostering a secure, scalable and inclusive ecosystem where tokenized assets can truly thrive.
