Theses C

Theses C: Impact of AssetChains On Private Finance Sector

C1: Mass adoption of decentralized lending approach

Blockchain-based Real-World Asset (RWA) registries that ensure direct causality will be capable of integrating with fair valuation oracles, thereby establishing a transparent, equitable, and publicly available framework for wealth valuation and credit scoring. This innovation paves the way for a peer-to-peer (P2P) credit system, encouraging broad participation in lending and borrowing activities directly between individuals.

The ESCROW engine, an integral part of the Assets Chain infrastructure designed for self-taxation and the execution of financial agreements, will facilitate P2P lending. This system allows for regulated decentralized fundraising, where multiple individuals can extend credit to a single borrower. It also supports 'compliant by default' mechanisms for the release of funds based on specific Key Performance Indicators (KPIs), such as milestones in real estate development projects.

By decentralizing the provision of credit, blockchain technology challenges traditional banking's monopoly on loans. Banks may find themselves divested of yet another critical function as individuals and communities take charge of their financial interactions, leveraging the security, transparency, and efficiency of blockchain systems.

C2: One co-created digital security and authentication system instead of many

The integration of Anti-Money Laundering (AML), Know Your Customer (KYC), and tax/security abuse detection systems directly into the blockchain's execution stack signifies a major shift in how these critical functions are managed. With these services embedded within the blockchain infrastructure, the need for private sector entities specializing in these areas is significantly reduced. The blockchain's inherent transparency, immutability, and decentralized nature allow for real-time, secure monitoring and compliance processes.

This transformation also opens the door for continuous improvement and innovation within the system. Community members, developers, and stakeholders can propose enhancements or introduce new logic and features to the system. Incentives for such contributions could come in the form of bounties, encouraging a collaborative and evolving approach to maintaining and upgrading compliance and security measures. This participatory model not only democratizes the development and upkeep of these essential services but also ensures that the system remains adaptable and up-to-date with the latest regulatory and technological advancements.

C3: Decentralized P2P lending and remote RWA ownership transfer requires trust layer - Authnethiaction, Insurance and Compliance

The successful implementation of Real-World Asset (RWA) ownership transactions and decentralized peer-to-peer (P2P) lending hinges on establishing a robust trust framework. This trust is facilitated by several key pillars:

  • Obligatory Personal KYC at National Blockchain Level: Ensuring that all participants are verified through a Know Your Customer (KYC) process at the national blockchain level is fundamental. This step guarantees that all parties in the transaction are identified and verified, reducing the risk of fraudulent activities.

  • Asset Authentication: Depending on the asset type and transaction nature, authentication can be either obligatory or optional. This process verifies the legitimacy and ownership of the assets involved, providing a solid foundation for trust in their valuation and transfer.

  • Insurance: To further bolster trust, certain assets might require an insurance deposit. This deposit can be claimed as compensation if the asset's authenticity is later found to be questionable. The requirement for insurance can vary, being either mandatory or optional based on the asset type and the perceived risk.

  • Compliance: Within the Asset Blockchain ecosystem, compliance is inherently ensured by regulators by linking token standards directly to legally recognized asset types, corporate structures, and ownership types. This linkage guarantees that all transactions adhere to the relevant legal and regulatory frameworks.

During the transition phase to full Asset Chain adoption, compliance might be managed by a dedicated service provider. This entity, acting as an 'onboarding manager,' would be responsible for integrating the country's legal system with the Asset Chain framework. This temporary measure ensures continuity and legal adherence until the system becomes fully operable and self-sustaining within the national blockchain infrastructure.

By integrating these elements, the Asset Chain aims to create a secure, transparent, and trust-based environment for RWA transactions and P2P lending, ensuring that both asset owners and lenders can engage with confidence.

C4: Remaining banks will user reverse custody protocol

Banks can adapt to the Asset Chains framework by developing layer 2 solutions that interface with it, though they will lose direct control over customer funds— a significant departure from their current operations. While banks may retain a role in asset reinvestment, their traditional profit model, heavily reliant on credit services, will be challenged by the rise of peer-to-peer (P2P) lending. This shift could drastically reduce the banking sector's dominance, positioning banks more similarly to capital investment firms or investment managers in terms of their role in the financial ecosystem.

Despite these changes, larger investment banks, such as StateStreet, might not only withstand the transition but could also potentially enhance their standing. This is due to their capacity to leverage Asset Chain for large-scale asset management and investment operations, areas less affected by the democratization of credit and more aligned with the strategic advantages offered by blockchain technologies. Consequently, while traditional and retail banking sectors may face diminution, investment banks that adeptly integrate Asset Chain capabilities could find new opportunities for growth and influence.

C5: Asset Chains will make Tax and accounting consulting and auditing industries disappear

The phased implementation of a self-executing taxation system is set to revolutionize how individuals and businesses interact with tax and social insurance contributions. This system, akin to driving a car, won't require users to comprehend the intricate workings of the tax engine. Instead, they will benefit from a single, streamlined system characterized by its unparalleled transparency.

Such a transformation raises significant questions about the future relevance of legal, tax, accounting, and auditing professions, particularly for major players like the BIG4, who are already facing substantial challenges due to advancements in AI technology. Given the trajectory of these developments, it's conceivable that within the next decade, the traditional industry as we know it could be completely transformed or even made obsolete. In its place, 'compliance by design' systems that are self-executable could become the norm, offering a more efficient, error-proof, and transparent approach to managing tax and compliance obligations.

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