Not impressed, says World Bank blockchain report on smart contracts

The latest World Bank blockchain report shows that crypto is finally knocking on the doors of traditional finance. Now, the World Bank has begun exploring smart contract benefits. In its study, the global financial institution observes that the blockchain smart contracts offer limited functionality as financial tools.

As per its official post dated July 8, the World Bank unveiled a report titled ‘Smart Contract Technology and Financial Inclusion’. The World Bank blockchain report explores the role of smart contracts in increasing the financial inclusion quotient in developing nations. Smart contracts are the fundamental elements in blockchain-based financial products and payment systems.

World Bank blockchain report undermines the technology’s prowess

The latest World Bank blockchain report on smart contracts reflects the increasing interest displayed by the conventional financial institutions in the decentralized economy. The growing sphere of blockchain applications and the rising graph of cryptocurrencies has attracted more investors to the decentralized fold.

Smart contracts can help advance digital financial inclusion. Which areas could see the biggest gains? https://t.co/dBHJ3bYnQp pic.twitter.com/Sy8fFpVk4U

— WBG_Finance (@WBG_Finance) July 13, 2020

Technically, a smart contract is a code that contains contract terms and is executed automatically once the specified contract conditions are met. In its study, the World Bank studied two sectors, namely the short-term unsecured loans and index-linked insurance.

The institution observed that as far as the insurance sector is concerned, smart contracts do not solve any problem that plagues the industry. However, they can help in determining the suitability quotient of a particular insurance product and also help boost trust among the participants.

In the case of short-term loans, it was observed that the loans are already disbursed via highly automated processes with adequate transparency. The introduction of smart contracts within loan operations won’t significantly increase process efficiency.

Smart contract provides limited functionality in mainstream finance

Consumer risk is a vital factor in consumer credit. The report states that smart contracts don’t provide any significant benefits to help enhance the credit rating of a borrower. Overall, the World Bank blockchain report doesn’t seem to be impressed by smart contracts technology.

Founded in 1944, the World Bank is a global financial institution that helps governments around the world tackle challenging economic conditions through sound financial advice. The latest World Bank blockchain report on smart contracts stands in a long line of blockchain-related projects that the institution has undertaken in the recent past.