EU report recognizes potential of permissionless blockchain in traditional finance

The European Union recently released a report exploring the potential of permissionless blockchains in traditional finance (TradFi). The report argues that permissionless blockchains should at least be considered as an option for traditional finance and financial market infrastructure, but should be adopted with caution. The report argues that such blockchains can be more neutral than private blockchains, thereby encouraging competition. The unrestricted access achieved by public blockchains contrasts sharply with the isolated permissioned blockchains that are proliferating. While public blockchains have shortcomings, there are many well-known solutions to their challenges, particularly by adding permissions at the smart contract level. The report states that permissionless blockchains can provide an interoperability layer for L2 blockchains, including regulated blockchains. When smart contracts are on a single chain, they are able to be combined into more complex functions. At the same time, the report also mentions the shortcomings of public blockchains, such as scalability, privacy, finality, and governance. It delves into each topic, as well as the controversial MEV issue.