According to KPMG, RegTech, a collapsed form of Regulatory Technology, is “any technology that uses information technology (IT) to enhance a firm’s regulatory processes”. RegTech helps streamline regulatory requirements and ensure that there is strict compliance. RegTech solutions are powered by solutions such as Artificial Intelligence (AI), Machine Learning (ML), cloud computing, Web 3.0, big data, etc.

Benefits of RegTech

Without any doubt, RegTech has disrupted the regulatory industry. However, the following are the benefits of RegTech that invariably led to its acceptance:

a) Improved accuracy

Using RegTech drastically reduces human error for the sake of regulation management and compliance, since the technology operates accurately regardless of the time it's being used.

b) Automating compliance management

Various RegTech solutions are used to protect against different types of risks such as data management and breaches. It also helps in reporting timelines and helps in recognizing suspicious activities.

c) Augmented efficiency

With the emergence of new regulations and the volume of existing regulations, it’s impossible to keep track of them all without using technology. RegTech is, thus, used to process large amounts of data easily and extract valuable insights.

d) Ensuring transparency and security

RegTech makes it easy for compliance management to track and verify compliance processes, reducing the risk of illegal activity.

From these various benefits of RegTech, it is quite evident that there are various use cases of the technology and its combination with blockchain can be revolutionary.

A brief on blockchain

Blockchain is a digital ledger that enables secure and transparent transactions stored across several computers/nodes. It is worth noting that this technology has revolutionized and simplified processes in several industries e.g. finance (such as Bitcoin and Ethereum), supply chain management (such as IBM Food Trust and EverLedger), and media (such as Audius and Verasity).

How RegTech connects with Web3

The duo, RegTech and Web3, have revolutionized the general outlook of the overall tech industry in their capacity. Have you ever thought of the great mark they have when the strengths of this beautiful 'art’ of technology are pulled together?

The following are the practical use cases and applications of RegTech and Blockchain:

a) Streamlining KYC and AML processes

Regulatory technology, RegTech, has proven its power in making Know Your Customer (KYC) and Anti-Money Laundering (AML) processes easy. Hence, enhancing secure data sharing/management and verification amongst financial institutions.

b) Transparency in compliance

By integrating RegTech and blockchain, institutions can establish a decentralised and tamper-proof system that enables recording and storing regulatory data. It also promotes accountability and enhances the integrity of regulatory compliance.

c) Data privacy and security in regulatory reporting

Due to the immutability and secrecy of the blockchain, RegTech's solution enhances confidential data protection and advocates for integrity in financial reporting. Also, the decentralized attribute of Blockchain makes it easy to transfer data without the need for a central authority. This reduces the risk of data breaches and unauthorized access.

Putting it all together

Though RegTech and Web3 would continue to be a great combo, their interconnection isn’t free of challenges. Scalability, regulatory uncertainties, and lack of technical expertise are the areas that still need to be worked on. It is undeniable that despite the challenges, these groundbreaking technologies have benefitted businesses and regulators making them streamline processes and build wealth.