Integrating Traditional Finance with Blockchain Technology
In a significant move towards integrating traditional finance with blockchain technology, investment products and compliance tools rooted in blockchain are set to revolutionize the financial landscape. As asserted by Sergey Nazarov, co-founder of Chainlink, these offerings could be more than ten times quicker and cheaper than their counterparts in traditional finance (TradFi).
Challenges in Traditional Compliance Systems
Speaking at the RWA Summit 2025 in Cannes, Nazarov highlighted the inefficiencies of the current compliance systems in TradFi, which often involve intricate manual procedures and fragmented solutions leading to astronomical costs—over $60 billion for financial crime compliance in the U.S. and Canada alone in 2023, based on a report from LexisNexis and Forrester Consulting.
Traditional compliance processes, particularly those related to anti-money laundering (AML) and know-your-customer (KYC) regulations, have drawn criticism for being overly complex and costly. Nazarov emphasized that the expense and challenges inherent in executing compliant transactions in traditional finance present a major barrier.
If you evaluate the costs and complexities tied to compliant transactions in TradFi, I believe our sector can operate 10 times faster and at a fraction of the cost.
Chainlink’s Automated Compliance Engine
To further this objective, Chainlink unveiled its Automated Compliance Engine (ACE) on June 30. This innovative framework offers a modular and standardized approach to regulatory compliance, applicable to both traditional and decentralized finance (DeFi) protocols. Currently available in early access to select institutions, ACE aims to facilitate the entry of potentially $100 trillion in new capital into the blockchain economy.
The Role of Real-World Assets
The emergence of Real-World Assets (RWAs) could also contribute to lowering the costs associated with traditional investments, such as stocks and commodities, through the tokenization enabled by blockchain technologies. Nazarov indicated that if the expenses related to compliance and identity verification could be reduced by five to ten times in blockchain environments, it would create a compelling incentive for institutions to embrace RWA-based investments.
He noted that the ACE framework not only supports the launch of tokenized RWAs but is designed to lessen the barriers and expenses for institutional investors engaging in blockchain transactions. Recently, on-chain RWAs have hit an all-time high, with over $25.4 billion in total value across approximately 318,000 asset holders, excluding stablecoin valuations, as reported by RWA.xyz.
