The BBA is now integrated into UK Finance. Please go to www.ukfinance.org.uk for new content and updates from UK Finance.
Material published by BBA prior to 1st July 2017 is still available on this website.
From 1 July 2017, the finance and banking industry operating in the UK will be represented by a new trade association, UK Finance. It will represent around 300 firms in the UK providing credit, banking, markets and payment-related services. The new organisation will take on most of the activities previously carried out by the Asset Based Finance Association, the British Bankers’ Association, the Council of Mortgage Lenders, Financial Fraud Action UK, Payments UK and the UK Cards Association.x
Blockchain – the technology which underpins the crypto currency Bitcoin – is set to revolutionise financial services. Using databases distributed across a number of participants – and which can only be amended with the consent of them all – blockchain and other types of distributed ledger technology (DLT) create a secure and transparent environment for transactions, reduce counterparty risk and improve efficiency.
Financial institutions and fintech firms are keen to capitalise on these potential benefits, and a number of pilot schemes including interbank payments, trade finance, transfers of securities and the issuance and settlement of catastrophe swaps, have been announced in the last 18 months.
The UK is leading the way in looking at the practical challenges that this new technology presents through the FCA’s Innovation Hub and regulatory sandbox and the Chief Scientific Adviser’s report on DLT which was published earlier this year. Meanwhile, the European Securities and Markets Authority (ESMA), has been analysing virtual currencies since 2013 and recently published a discussion paper on the use of DLT in securities markets.
The BBA has worked closely with Clifford Chance to put together a detailed response to ESMA’s paper and our view is that DLT has the potential to significantly improve the securities markets and regulatory compliance and reporting. However, there are a number of legal and regulatory issues that will need to be addressed. These include:
Given that the use of DLT in the securities markets is still at an early stage of development, the BBA proposes that a number of things need to be considered when putting in place any legal or regulatory framework governing its use. These include:
Despite the many challenges that lie ahead for both financial institutions and regulators, it is clear that DLT presents a wealth of opportunities across applications both known and yet to be developed. The open-mindedness of regulators to date has played an important role in fostering such a supportive environment, and whilst this remains we will undoubtedly see continued innovation in this exciting new area.