Since the seed of an idea around a cryptographically linked chain of blocks first emerged, blockchain has come a long way. Today, the tech is being used in many use cases, but it’s in financial services where it is being adopted at scale, and ticking a lot of the boxes it promised early on.
For example, BlackRock used JP Morgan Chase’ Tokenized Collateral Network (TCN) to tokenise shares in one of its money market funds, which were then sent to Barclays as collateral for an over-the-counter (OTC) derivatives trade between the firms. This transaction, which used a private blockchain on JP Morgan’s platform, now called Kinexys, demonstrated the greater efficiency and stability which blockchain can offer.
When it comes to banking and finance though, which is still arguably the most compelling case for blockchain, there is something still missing. Yes, it can remove friction, cut delays, and streamline processes – but for most in the sector, the lack of confidentiality is a clear dealbreaker.
Unlike traditional systems, public blockchains expose everything by default. Wallet balances, transaction histories, and counterparties are visible to anyone – meaning every deposit, loan, and withdrawal can be scrutinised. This transparency may not faze retail crypto traders, but for private banks and their clients managing significant capital, it’s a huge problem. It could be a bank conducting a discreet client trade, a hedge fund managing sensitive portfolios, or wealth managers handling confidential transactions, whatever the case, exposing financial details risks breaching client privacy and completely undermining any competitive advantage.
With the above risks simply not acceptable in banking, many potential blockchain use cases in finance are either being shelved or remain in experimental stages.
But that’s starting to change. Apple, IBM and a wave of privacy-focused blockchain projects are making headlines, seeing demand build across the finance world for privacy-preserving technologies. Tech that can enable confidential, scalable, and compliant onchain financial applications – without compromising performance, compliance, or auditability. Tech that can redefine how confidentiality is handled in the blockchain and, ultimately, in all of cloud computing. Tech that sits in the field of Fully Homomorphic Encryption (FHE).
Put simply, FHE is a privacy-preserving technology that enables data to be processed without ever decrypting it – meaning that sensitive information remains encrypted even while in use. In other words, it’s an encryption technique that allows you to have confidentiality on top of public blockchains.
finance.yahoo.com
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