It’s Time for Financial Institutions to Support Digital Assets


It's Time for Financial Institutions to Support Digital AssetsIn my blog on executing a digital strategy, I wrote, “the most important strategic objective for financial institution (FI) IT leaders today is leading initiatives that facilitate business transformation through digitalization of services and customer experiences.”

The emergence of new crypto-related products and services alongside traditional financial products and services has made it imperative for banks and other FIs to support activities related to digital assets. Being adequately prepared to offer digital products and support digital currency transactions is key to remaining competitive in the 2020s.

Distributed Ledger Technology: Impact on Financial Services

Distributed ledger technology (DLT) and the underlying blockchain technology supporting DLT are driving the evolution of financial products and services. A broad range of digital assets are increasingly used by FIs and Banking-as-a-Service intermediaries to support banking and financial processes, including smart contracts, settlements, central bank digital currencies (CBDC), and cryptocurrencies.

As I write in my latest report, CIO/CTO Checklist: Blockchain and Distributed Ledger, this evolution in financial products and assets means that “banks and FIs will need to update and add to existing architecture blueprints and related roadmaps to avoid redundant infrastructures, applications, and support teams.”

Challenges in Adapting Architecture to Support Digital Products

As FIs introduce crypto-assets and digital products dependent on DLT and underlying blockchain technology, they will encounter unique challenges adapting enterprise IT strategy and architecture to effectively implement DLT. Architecture design will need to be modified to cost-effectively maintain regulatory compliance as financial products continue to evolve.

FI CIOs and CTOs must ensure that the transparency that facilitates regulatory monitoring, analytics, and reporting is built into the architecture framework. Executives should also consider (re)designing an architecture blueprint that can accommodate products and services utilizing many forms of digital money and assets.

Best Practices for CIOs/CTOs Implementing DLT and Blockchain Technology

To assist FI IT leaders in preparing their institutions for the implementation of DLT and underlying blockchain technology across a wide range of processes, my team has identified seven best practice considerations. They are summarized in the table below:

CIO-CTO Checklist: Blockchain and Distributed Ledger Best Practices

Addressing the checklist shown in this table and outlined in my latest report increases the effectiveness of CIOs and CTOs in leading efforts to map and incorporate a phased DLT implementation into the enterprise IT strategy, roadmap, and architecture.

Exclusively for members of the Financial Services CIO/CTO Advisory Practice, bank and FI IT leaders can use these practices to prioritize actionable steps to extend or update existing architecture blueprints and related IT roadmaps that support digital products. Interested in learning more about how our strategic insights enable your organization’s move to offer DLT-based products and services? Contact me at [email protected] to start the conversation.