The Blockchain and Web3 Observatory at the Politecnico di Milano is one of Europe's academic strongholds when it comes to decentralized technologies. Associated with the DEC Institute, it has become pivotal for both entrepreneurs and students when it comes to unpacking the complexities and potentials of integrating blockchain into established industries, enhancing security, efficiency and transparency.
The observatory's research into the adoption of digital assets by the world's top 100 banks reveals a significant trend. Of those 100, 59 have ventured into projects related to the Internet of Value, with a substantial focus on Central Bank Digital Currencies (CBDCs). CBDCs represent a digital form of fiat currencies, combining the traditional reliability of government-backed money with the efficiency and security of blockchain. These digital currencies aim to streamline financial transactions, broaden financial inclusion, and fortify the financial system against fraud and cyber threats.
Stablecoins are also part of the equation, acting as a bridge between the volatile world of crypto and the stability of standard currencies like the US dollar. By reducing the unpredictability inherent to digital assets like Bitcoin, stablecoins present an attractive option for financial institutions looking to offer digital assets that are suitable for everyday transactions.
The observatory's findings also shed light on the burgeoning sector of crypto custodian services, which constitute 70% of the cryptocurrency-related initiatives among the top banks. These services, crucial for the secure storage and management of digital assets, reflect the growing demand from customers looking to engage with cryptocurrencies within a secure and regulated framework.
Banks are putting resources into facilitating direct and indirect cryptocurrency investments, allowing customers to diversify their portfolios and engage with the digital market. This move towards offering a broad spectrum of cryptocurrency investment options indicates the banks' commitment to meeting the evolving needs and preferences of their customers.
The research also goes into the insurance sector, traditionally reliant on paper-based and manual processes, which stands on the cusp of a transformative shift powered by blockchain. The observatory outlines several key areas where blockchain can significantly disrupt and enhance insurance practices:
• Fraud Detection and Risk Prevention: The immutable nature of blockchain ledgers can drastically reduce fraudulent claims and activities, thereby safeguarding the financial health of insurance companies and strengthening the industry's overall credibility.
• Reinsurance and Claims Processing: By facilitating a more streamlined flow of information and payments between insurers and reinsurers, blockchain can simplify the complex processes involved in reinsurance contracts through the use of smart contracts.
• Efficiency in Property and Casualty Insurance: The adoption of shared ledgers and smart contracts in this sector promises a more efficient and coordinated approach to policy execution, reducing unnecessary costs and delays.
Innovation in Health Insurance: Blockchain technology can securely encrypt and share medical records among healthcare providers, fostering greater interoperability within the health insurance ecosystem and leading to improved patient care and reduced administrative costs.
• Simplification in Life and Travel Insurance: In life insurance, blockchain can automate the claim process triggered by the issuance of a death certificate, while in travel insurance, it can enable automatic compensation for events like flight delays or cancellations, improving customer experience and operational efficiency.
By illustrating the impactful changes blockchain can bring to banking and insurance practices, the Web3 Observatory of Milan's comprehensive research showcases the pivotal role of digital innovation in reshaping traditional industries. It makes us think of a new era marked by enhanced efficiency, heightened security, and greater transparency.