The financial system has largely recovered after the turmoil of 2018 and the global financial crisis. Few real changes have been made, though. Although reform has been promised on both sides of the Atlantic, the system has remained largely the same. A decade after the crisis, the world is still vulnerable to largely the same threats.

Big banks were supposed to change their ways of doing business and undergo internal reforms to prevent future problems. Some of those who are blamed for the crisis may have taken a step back, but the number of banks that continues to dominate the landscape is scarcely more than twelve. That’s not the whole story, though, since the dominance of the too-big- to-fail financial institutions may nevertheless be coming to an end. And what seems likely to end it is not internal reform but rather the emergence of the transformative technology known as blockchain.

Big Banks Continue to Pose a Big Threat

In the aftermath of the financial crisis, people were hoping that those responsible would be held accountable. When this didn’t happen, many remained optimistic that at least the threat posed by the too-big-to-fail banks would be resolved. According to Kashkari, who worked for both Goldman Sachs and PIMCO, the danger is still there and things could take a turn for the worse when least expected.

An important milestone was set in 2010 when the Dodd-Frank financial reforms were implemented. The critics were not satisfied with the progress made and things took a turn for the worse in recent years. Some of the legislation is being rolled back and under the new administration, it doesn’t benefit from the same levels of support. Under these circumstances, President of the Federal Reserve Bank of Minneapolis Neel Kashkari, who formerly worked at the U.S. Treasury Department, urges lawmakers to take seriously the need for comprehensive reforms, while educating the public about the risks of a new financial crisis.

Different Paths Leading to the Same Goal

Speaking from a position of considerable authority, Mr. Kashkari has highlighted the threats in an eloquent and cogent manner. His warnings are also timely, coinciding as they do with the emergence of the new technology that we know as blockchain. This technology is a game changer not least because it makes it possible for financial transactions to be organized in a more decentralized way. Some variants of this technology have already been made available, while others are in the process of being developed and refined. And make no mistake about it; blockchain has a very real potential to lower transaction costs throughout much of the financial sector.

At the very time when a new financial crisis may well be looming, the emergence of blockchain provides us with some very welcome good news. The considerable upside of this new technology is that it enables us to realistically envisage a new era of decentralized financial transactions that are also more transparent and cost-effective. These financial innovations are still taking shape, of course, and they may yet evolve in unforeseeable ways. They may also be met with considerable opposition, but history has taught us that technological progress is inevitable and unstoppable. Ultimately, by greatly reducing the need for employing an intermediary when performing financial transactions, blockchain may spell the end of the big banks.