How blockchain enhances transparency, accountability, and efficiency for advisors and clients

Transparency is considered to be one of the key value propositions that public blockchains can offer in financial services. In today’s main article, scott sunshine of blue dot advisors He shares his thoughts on financial governance in the blockchain world.

In “Ask an Expert” Cato Ferran III from La Hoja Capital Partners explains how Bitcoin can be used as collateral in structured credit portfolios.

In today’s rapidly evolving financial environment, the implementation of blockchain technology is revolutionizing traditional corporate governance practices. This innovative technology provides a transparent, immutable, and decentralized platform that delivers significant benefits to financial advisor clients. By leveraging blockchain-based governance, financial advisors can strengthen trust, improve accountability, streamline operations, and unlock new investment opportunities for their clients. Here’s how:

Transparency as the new gold standard

One of the most attractive benefits of blockchain technology is its ability to provide unparalleled transparency. Blockchain creates an interference-proof ledger that records all company activities and transactions, making it easier for financial advisors to verify information and trust the companies they invest in. This increased transparency increases confidence in investment decisions and reduces the risk of fraud and fraud. Prevent mismanagement and ultimately strengthen financial advisor-client relationships.

Corporate accountability and performance in the new digital era

Due to the immutable nature of blockchain, once a transaction is recorded, it cannot be changed or deleted without consent from the network. This feature facilitates accountability among executives and board members, as all actions and decisions are permanently recorded and traceable. Companies that prioritize good governance practices facilitated by blockchain technology are more likely to perform well over the long term. This performance translates into higher returns and reduced investment risk for clients, creating a win-win situation for both financial advisors and their clients.

Democratized decision-making and shareholder engagement

Blockchain platforms facilitate direct participation in voting and governance activities, allowing customers to take a more active role in the companies in which they invest. This democratization of decision-making will lead to better investment outcomes by providing clients with more aligned corporate strategies, more responsive management practices, and, ultimately, more robust and resilient investment portfolios. bring.

Streamlined operations and cost efficiency

Blockchain technology can automate and streamline various governance processes, reduce administrative costs, and improve operational efficiency. Smart contracts are self-executing agreements with terms written directly into code that can automate routine tasks such as compliance monitoring, dividend distribution, and voting. By eliminating manual intervention and reducing administrative overhead, financial advisors can pass these cost savings on to their clients through lower fees, better investment opportunities, or higher investment returns.

Enhanced security and data protection

Security is a top priority in the financial industry, and blockchain technology provides a robust solution to protect customers’ sensitive data and investment information. Blockchain’s cryptographic algorithms and decentralized architecture make it highly secure against tampering and unauthorized access. By storing data on blockchain, financial advisors can increase data protection, reduce the risk of data breaches and identity theft, comply with strict data privacy regulations, and provide peace of mind to their clients.

Regulatory compliance and risk mitigation

For financial advisors, navigating a complex regulatory environment can be difficult. Blockchain technology helps by providing real-time transparency, traceability, and auditability, making it easy to demonstrate compliance with laws and regulations. This enhanced compliance oversight reduces regulatory risk, facilitates smoother interactions with regulators, and helps financial advisors and You can protect both your clients from potential legal pitfalls.

In conclusion, corporate governance practices in the blockchain world offer significant benefits to financial advisor clients. From increasing transparency and trust to increasing accountability, streamlining operations, increasing security and regulatory compliance, blockchain technology is revolutionizing the way financial advisors and their clients interact and collaborate. By adopting blockchain-based governance solutions, financial advisors can better meet the interests of their clients, help them achieve their financial goals, and create stronger and more resilient investment portfolios for a prosperous and sustainable future. can be built.

Question: How are managers using Bitcoin collateral in their real estate loan portfolios?

Bitcoin is used in a hybrid collateral model, where a loan is underwritten based on the value of the real estate asset and a portion of Bitcoin is purchased with the loan proceeds, creating two collateral assets to secure the loan. .

Question: Why would a borrower want to do that?

These hybrid loans are designed for borrowers who are already on board with Bitcoin and are comfortable with the asset. Bitcoin is held in a joint partnership between lenders and borrowers, with both parties benefiting from the long-term appreciation of the asset.

Question: How does this affect portfolio risk?

Although this is a new model, its risks are still being evaluated. Managers working on this strategy rely on the macro trend of rising Bitcoin prices despite historical short-term volatility. The manager analyzes Bitcoin’s cyclical price performance to guide portfolio management and increase returns when Bitcoin price reaches a certain threshold. Bitcoin’s growth potential allows managers to refrain from using traditional leverage to increase profits, and instead primarily use leverage and add more risky, high-interest loans to their portfolios. Therefore, traditional credit risk is reduced to some extent.

To Sam Bankman Freed, former CEO of FTX, 25 years imprisonment in U.S. federal court last week.