7th November 2016

Blockchain and capital markets – navigating the regulatory and legal landscape

Written by Imran Gulamhuseinwala, EY Partner and Head of FinTech

Blockchain technology has the potential to revolutionise the profitability of capital markets. The promise of risk mitigation, capital efficiency and operational benefits can only be realised through legal and regulatory change.

Blockchain has generated significant interest in capital markets, as FinTech start-ups, global banks and other providers evaluate technology and potential use cases. Yet, many questions remain unanswered as to how blockchain, or other forms of distributed ledger technology (DLT), fit into the current regulatory and legal infrastructure.

To deliver viable and valuable solutions in the highly-regulated environment of capital markets, blockchain will need to navigate the legal and regulatory landscape – either by evolving solutions which conform or by engaging policymakers to reshape its current contours.

Innovate Finance has partnered with Hogan Lovells and EY to produce Blockchain and the Capital Markets Journey which outlines the legal and regulatory challenges of using DLT in capital markets, including the over-the-counter (OTC) derivatives market. This report focuses on the UK’s regulatory and legal environment as a stepping-stone to understanding analysis and issues that are similar to those in other jurisdictions.

We outline key themes that we believe will help shape the future architecture of blockchain:

  • Informing industry, policymakers and regulators of the potential impact of legal and regulatory requirements on proposed DLT-use cases
  • Providing regulatory insights about DLT for product providers, product buyers and investors (i.e. buy side firms)
  • Providing recommendations to support regulatory action in the UK and EU to accommodate DLT solutions
  • Proposing regulatory and industry collaboration at an early stage to realise its full benefits
  • Building skills and knowledge across the industry to support the DLT ecosystem

In this report, we have helped to kick-start the debate by addressing important legal and regulatory questions that will impact the development of blockchain. Questions range from organisational to philosophical – all designed to encourage a wider agenda where regulators and law makers will collaborate with the industry to enact change.

Download the report here. Please don’t hesitate to get in touch if you’d like to discuss any of these issues in more detail.

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