The UK’s Financial Conduct Authority (FCA) released a discussion paper on Monday that addresses blockchain technology’s potential benefits and risks. The release of the paper was timed to coincide with FCA Executive Director of Strategy and Competition Christopher Woolard’s speech today at London’s Innovate Finance Global Summit. The speech was notable for Woolard’s encouragement of the blockchain industry’s ongoing innovation, but served as a reminder that regulators have a role to play as well.
The document, titled Discussion Paper on Distributed Ledger Technology, declares the FCA’s commitment to promoting innovation from a variety of sources, including new technologies like DLT:
“Distributed ledger technology (DLT) is an example of rapidly developing technology which offers exciting potential to support the needs of consumers and the market. DLT may also present new challenges and potential risks. For example, how regulated firms allocate responsibilities for systems shared among them.
We generally take a ‘technology neutral’ approach to regulating financial services and are interested in considering whether there is anything distinctive about DLT which would require us to take a different approach.”
The FCA paper goes on to provide a brief explanation describing distributed ledger technology, and suggests that the regulators anticipate increased utilization of the technology in real-world environments throughout 2017 and 2018.
The paper also delves into both the risks and potential benefits that the technology can provide in the marketplace, including reduced costs, increased speed for record and transaction reconciliation, and the elimination of certain intermediary roles. Particular attention is also given to the FCA’s role in proper regulation of the technology to protect both consumers and markets.
The document also poses seventeen important questions that should spark a great deal of debate in the weeks and months to come. The regulator is requesting that anyone wishing to respond to the discussion paper do so by July 17, 2017. Those responses will be considered by the Authority as it moves to shape blockchain regulation in the future.