A study raises the need for a single platform with verified information. The system aims to grant investors autonomy in the registration process.
The Brazilian Securities Commission (CVM) published on December 18th a study jointly developed with the Institute of Technology and Society of Rio de Janeiro (ITS Rio). In the document, it proposes to incorporate a blockchain in the conformation of a single registry of Investors
The study, called “Investor Master Data: operational challenges, technological innovations, and proposals”, aims to help understand the advantages and disadvantages of using a blockchain in the real estate sector.
The Securities Commission stated that the study proposes using a blockchain platform as a possible solution to public spending that represents the collection of data to respond to the Know Your Customer (KYC) procedures” that banks and financial institutions apply as part of crime prevention measures. According to the document, there are currently several gaps in this system, as well as duplicated processes and a lack of information that eventually increases costs.
The proposal itself states that investors do not need to repeat their registration in all the financial institutions with which they have a commercial relationship, but that all their data are available in a single space in the CVM that may be accessible to the entire financial system. The study determines that, although the existence of a cadastral system using a blockchain is not yet known, the tendency is leaning towards the use of private and authorized networks.
According to estimates by the CMV, the annual costs associated with cadastral management in Brazil can reach about BRL 4.3 million Brazilian reais (BRL) (approximately one million US dollars). Suitability management can reach BRL 3.8 million (about USD 900,000), and the monitoring of politically-exposed people (PEP) can cost BRL 5 million per year (more than one US million dollars).
The study proposes, among other solutions, to experiment with new technologies, such as distributed accounting technology (DLT), in the KYC process in order to reduce costs and increase operational efficiency, according to comments by Bruno Luna, head of the Advisory Council on Economic Analysis and Risk Management (ASA) of the CVM.
The study also proposes timely improvements in current standards, insertion of the Securities Commission in a broad agenda of regulation and data exchange, coordination of the utility model and a proof of concept (PoC) for the registration of PEP using a blockchain. Additionally, it highlights the importance that investors have greater autonomy to manage their cadastral data through digital identities that facilitate the centralization of information, thus increasing efficiency.
For the operation of a DLT-based cadastral system, a digital identity system with coupled legal validity may be necessary. At the international level, digital identity implementations already exist in both the private and public sectors. In the technological dimension, there are already examples of architecture and technical identification solutions that incorporate DLT, such as Indy, Sovrin, and ION.
The document mentions the implementation of a kind of digital “passport” through which investors could add and delete data about themselves, as well as indicate and allow notes on their data originated or controlled by third parties. At the same time, the information validated by third parties could subsequently be sealed by digital signatures with the aim of adding reliability.
The research concludes that the use of a blockchain and digital identity architectures correspond to an idealistic model that must be reached through continuous evolution, with models that are more feasible in the short term. As part of the implementation process, it is also considered essential that the CVM intervene in discussion forums and intersectoral working groups.
By Willmen Blanco