The Impact of Regulatory Technology (RegTech) on Corporate Compliance: A Study on Automation, AI, and Blockchain in Financial Reporting

Abstract

Another area of technological progress that affects financial reporting and its inclusivity is artificial intelligence (AI), known for its ability to mimic human decision-making and reasoning models. Technological progress has made fast changes, with automation and artificial intelligence being vital options for each organization or business in terms of digital advancements to ensure efficiency, transparency, and financial accuracy. These advances in automation and artificial intelligence also come together with blockchain development technology naturally. The concept of blockchain was first introduced with the development of bitcoin as an information format system following each other through transactions. Blockchain is gaining increasing importance due to its high security, decentralized structure, and transparency. Therefore, financial transactions are under secure control, and recorded itemized data are transacted through blocks in a chained manner. Due to this structure, the information transferred over the blockchain is secure and auditable by verifying the transactions. However, far beyond being a simple financial transaction recording, blockchain is also secure, transparent, decentralized and trustworthy, and a transformative role in revolutionizing the world of several sectors is envisaged as well. The financial report rule-making process is complex, involving agency cost issues, legal battles, and giant extraordinary political pressures. On the other hand, financial reports are central to the regulatory system. Therefore, these new digital technologies have the potential to change quickly with transformative potential to the regime itself and the practice of compliance more widely. This essay intends to unravel the implications on regulatory authorities and the corporate sector of such a revolutionary approach. In light of an exploratory essay of two case studies, after presenting the context of their emergence, demand and supply-side implications will be examined. The financial market case stories to be told present at a macro-level the insights of this technology’s regulatory technology for more regulation and market transparency with many actors adopting an industrial approach and at a micro-level its threat (or opportunity) to control centers given six articles published in Bloomberg and Reuters. After discussing key findings and academic and public implications, the potential and further research are formulated with a regrow based on large corpus exploration.