Chainlink ACE Aims to Slash TradFi Compliance Costs by 90%

Blockchain compliance tools are poised to transform the traditional finance (TradFi) industry by drastically reducing costs and enhancing efficiency. Chainlink co-founder Sergey Nazarov highlighted that blockchain-based investment products and compliance tools could be more than ten times faster and cheaper than traditional offerings. This advancement could drive increased adoption of digital assets among financial institutions, which are currently hindered by the high costs and complexities of traditional compliance processes.

Traditional financial compliance products are often fragmented and expensive due to complex manual processes, leading to billions of dollars in costs for institutions. Nazarov pointed out the inefficiencies in the current system, particularly in areas such as identity verification, Anti-Money Laundering (AML), and Know Your Customer (KYC) procedures. He emphasized that the high costs and complications associated with compliant transactions in the TradFi world present a significant barrier to entry for many institutions.

To tackle these challenges, Chainlink recently unveiled its Automated Compliance Engine (ACE), a system designed to provide a modular and standardized framework for managing regulatory compliance across both traditional and decentralized finance (DeFi) protocols. ACE is currently in early access for select institutions and aims to unlock new capital to enter the blockchain economy. The system is expected to reduce the friction and cost for institutional investors entering blockchain markets, making it easier for them to adopt blockchain-based investments.

The efficiencies of blockchain technology could make investing in traditional assets such as equities and commodities cheaper through real-world asset (RWA) tokenization. This could inspire more institutions to adopt RWA-based investments, as the compliance and identity costs in the blockchain format are significantly lower. Nazarov noted that if these costs are 5 to 10 times cheaper, it would provide a substantial advantage for institutions looking to enter the blockchain market.

Chainlink’s ACE framework supports launching tokenized RWAs with built-in compliance, potentially lowering the friction and cost for institutional investors. This could unlock a significant amount of new capital to enter the blockchain economy, making it easier for institutions to adopt blockchain-based investments. The cumulative all-time high of onchain RWAs reached over $25.4 billion across 318,000 total asset holders, excluding the value of stablecoins, demonstrating the growing interest in this area.

The launch of ACE and the potential for blockchain compliance tools to slash TradFi costs represent a significant step forward for the industry. By addressing the inefficiencies and high costs associated with traditional compliance processes, blockchain technology has the potential to revolutionize the way financial institutions operate, making it easier and more cost-effective for them to adopt digital assets and blockchain-based investments.