Timur Turlov, the head of the investment group Freedom Holding Corp., recently expressed his skepticism about the potential of blockchain technology in developing new financial instruments. He questioned whether cryptocurrencies could rapidly supplant traditional money within the financial system.
Turlov confessed that he needs to fully comprehend the significant advantages of blockchain or how it could revolutionize the world. In his view, the integration of technologies and faster, cheaper payment methods is occurring even before the widespread adoption of blockchain.
Speaking at an international forum in Astana dedicated to financial innovation, Turlov voiced his concerns about the current phase of blockchain application in financial instruments and products. He underscored the additional risks associated with the use of blockchain technology.
For example, the development of Central Bank Digital Currencies (CBDCs), intended to incorporate the state into the blockchain ecosystem, could result in substantial operating cost increases and pose a risk to the overall stability of the financial system.
Potential benefits of blockchain
Despite his reservations, Turlov conceded that blockchain technology does hold potential benefits. However, he argued for caution in its implementation due to the associated risks. He expressed hope that his concerns would ultimately prove unwarranted.
Still, he noted that regulators worldwide are currently scrutinizing the risks linked to blockchain technology. The competition between central banks and their banking systems, which could arise from introducing CBDCs, might create imbalances that need careful consideration before launching digital initiatives.
The National Bank of Kazakhstan plans to introduce its digital currency, the Digital Tenge, by the end of 2025. In a report published in December 2022, the National Bank assured that there were no risks linked to using the Digital Tenge concerning monetary policy, financial stability, and the overall economy.
Blockchain technology is fundamentally a decentralized mechanism for data storage, arranging it in chronological order within an unalterable chain. This ensures that data can only be modified with the consensus of all participants in the business network.
For instance, blockchain technology can eliminate the need for a third party in real estate transactions by providing a transparent and safe platform for direct transactions between buyers and sellers.
In February 2023, Kazakhstan’s state corporation “Government for Citizens” demonstrated a blockchain product developed in collaboration with Freedom Finance Bank and developer BI Group. This innovative solution facilitates the registration of online transactions for the buy and sale of secondary housing.
By delving into Timur Turlov’s insightful concerns and thought-provoking perspectives, we can acquire a deeper and more comprehensive understanding of the intricate complexities and multifaceted considerations that encompass the application of blockchain technology in the dynamic and ever-evolving financial industry.
Exploring his nuanced insights allows us to navigate the challenges and seize the possibilities presented by this transformative technology, paving the way for innovation and progress.