THE POTENTIAL OF BLOCKCHAIN AND SMART CONTRACTS IN BANKING AND FINANCE

This thesis explores the transformative potential of blockchain technology and smart contracts within the banking and financial sectors. In recent years, the rapid evolution of distributed ledger technologies (DLTs) has opened new frontiers for secure, transparent, and decentralized systems capable of reducing operational inefficiencies and counterparty risks. The research begins with a practical case study that illustrates how blockchain-based infrastructure can enhance processes such as international payments, trade finance, and compliance. Subsequently, the study delves into the fundamental components of blockchain, including architecture features, consensus mechanisms and tokenization and examines the mechanics and legal/economic implications of smart contracts. Particular attention is given to their role in automating transactions, enforcing agreements without intermediaries, and enabling decentralized finance (DeFi) ecosystems. The thesis also evaluates the impact of Central Bank Digital Currencies (CBDCs), Layer 2 and Layer 3 scaling solutions, and the regulatory challenges that institutions face in adopting blockchain at scale. Through a combination of qualitative analysis and technical insights, the work assesses the viability of integrating blockchain into core banking systems and outlines several future scenarios, ranging from incremental adoption to full-scale disruption. In conclusion, while blockchain is not a panacea, its potential to redefine trust, efficiency, and value transfer in finance is substantial provided that technological, legal, and governance challenges are effectively addressed. This thesis thus, is characterized by four crucial chapters, in which each of them explains how blockchain system and smart contract implementations work thought the banking/insurance environment. The first one explains the historical context, digitalization and limits of traditional infrastructure and the birth of Bitcoin. The second chapter analyzes some examples in which ways the Italian banks and insurances provide blockchains services by using smart contracts and AI. The third one instead, goes through theoretical foundation about these technologies and how they have been building, by going deeply in differences between traditional finance and decentralized finance as well as advantageous/disadvantageous of them. The quarter one and conclusions talk about possible future scenarios in the credit system, analyzing and suggesting how banks will act in a hypothetical future year (2030) and which kind of new services that can be produced to help consumers and companies with better efficiency, trust and transparency.