The infamous Wirecard scandal and how blockchain could have stopped it.
What many crypto pioneers began to tout back in 2017 still remains true today. This is that the adoption of blockchain technology and cryptocurrencies has the potential to greatly benefit numerous industries.
It begs the question why in 2020 it has still not seen the widespread adoption many hoped for during its first days of hype? Even more surprising is how many issues, large and small, could be avoided with the use of the technology. In this article we will talk about the possibilities for crypto to aid the smallest financial transactions to the biggest financial scandals.
What Happened with Wirecard?
When transactions take place via blockchain there is really no way to misplace even the smallest decimal point amount of euros. This knowledge could have probably come in handy to Wirecard: an insolvent German payment processor and financial services provider. Through falsified contracts, money laundering and other criminal activities the company managed to misplace over € 1,900,000,000 from their balance sheet.
The fiasco first broke public news back in January 2019 from a report in the Financial Times. In the report high-ranking Wirecard managers had taken part in criminal acts such as falsified contracts and money laundering back in 2018. The article led to the company’s share price to fall over 20%. More and more reports and headlines were released that painted a clear picture of a fraudulent business model. After a series of accusations and investigations from Singapore to India ro Germany the company’s stock prices had plummeted but little answers were still known.
An unexpected turn took place on 18/06/2020. On this date Wirecard was meant to present a consolidated balance sheet with an audit certificate. Instead, what they had to show was that 1.9 billion euros was missing from the balance sheet and no existence of the sum was present even in foreign trust accounts.
Finally the end of WIreCard AG transpired on 25/06/2020 when the company filed for insolvency at the Munich Local Court.
What about Crytpo?
- Transparency
So how could cryptocurrencies and blockchain technology avoid this entire fiasco? One word: transparency.
The transparency inherent in blockchain technology would allow for a system where getting away with such blatant fraud would have been impossible. With blockchain the risk of balance sheet falsification and transaction falsification is removed because these actions are coordinated by codes and not humans. Wirecard has illuminated a problem not unique to themselves. Rather a very old problem within the finance world, that too many unaudited parties within a system can quickly breed corruption and fraud.
- Decentralization
Transparency quickly takes us to our next point which is decentralization. While transparency would have illuminated the crimes committed by high ranking Wirecard managers, a decentralized system of power would have made the crimes impossible to be committed in the first place.
Conclusion
When it is all said and done, yes a system based on blockchain tech that would have made transactions transparent and decentralized could have removed factors that facilitated the ease and length of time that high ranking Wirecard managers were able to commit their crimes.