Be it errors, fraudulent transactions or bugs in the code on smart contracts they all require strong governance mechanisms to ensure they can be dealt with in a way that doesn’t create vulnerability.
Read the April 2017 Forrester Report: Don’t Dismiss Accenture’s Blockchain Redaction Solution – You May Need It One Day – Not “Immutability” But Well-Governed, Tamper-Evident Systems Should Be Your Goal
Banks, capital markets firms and insurers are already engaged in trials, pilots, proofs of concept studies and initial production solutions. Blockchain’s audit and data-tracking capabilities are beginning to be deployed in new settings such as payments, reference data, Know Your Customer (KYC) and trade finance.
In most instances, immutability is an obvious benefit. But it’s also increasingly apparent that instances will arise where absolute immutability is a hurdle standing in the way of blockchain’s adoption.
For financial services institutions faced with risk and regulatory requirements, absolute immutability can become problematic for large-scale enterprise use in areas including: Data storage
Data storage: In a world where every transaction remains on the blockchain permanently, new solutions will be required as the need for onchain data scale expands. Illegal actions
Illegal actions: On an immutable blockchain, illegal or nefarious activities could stand uncorrected, as in the recent case of the $60 million smart contract hack of the DAO. Operational errors
Operational errors: Coding and transaction mistakes happen and misbooked information may be confidential or required by law to be removed. Permanent mischief
Permanent mischief: Pornography and classified documents are already permanently embedded on the bitcoin blockchain. The heavily regulated financial services industry would need to ensure sensitive data could not be permanently embedded on a blockchain solution. Regulatory concerns
Regulatory concerns: The European Union’s incoming General Data Protection Regulation regarding consumer data privacy and ownership rights and the US Fair Credit Reporting Act, the GrammLeachBliley Act and the SEC’s “Regulation SP” all require personal financial data to be redactable—something that is not possible on an immutable platform. “As with all new innovations, for the world to benefit more broadly from blockchain, we must be open to its development and evolution.”