What a DAO will look like for a bank or financial institution
DAOs can provide several services to banks, including asset management, compliance, and lending.
Today, banks are already using blockchain technology for things like payment, clearing and settlement, trade finance, identity and syndicated loans, according to the Financial Times. However, there are still many unexplored areas in banking where a DAO-based model could be useful:
In the world of crypto, initial coin offerings (ICOs) break down the barrier between access to capital and traditional services like capital raising companies. Similarly, banks can use DAOs to raise capital from a wider range of investors through ICOs.
Loans and credit
The use of decentralized technology in banking can eliminate the need for gatekeepers in the lending industry. DAOs offer people safer ways to borrow money, not to mention lower interest rates and better terms.
DAOs could also streamline trade finance by digitizing paper-based processes and automating manual tasks. This would make it easier for banks to track their transactions, reducing the risk of fraud and building trust among players in global commerce.
A DAO can help banks issue, manage and trade securities, both digital and traditional. By tokenizing traditional securities such as bonds, stocks, and other assets and placing them on blockchains, banks can facilitate the creation of interoperable, efficient, and publicly accessible capital markets.
Customer KYC and Fraud Prevention
Because DAOs are transparent and decentralized, they offer banks a way to verify the identity of their customers while preventing fraud. Using smart contracts, banks can automate customer onboarding and KYC processes. Blockchain technology also provides financial institutions with an efficient and secure platform to share information with other businesses.