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Blockchain Breakfast – Summer 2016Regulatory Briefing
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Distributed Ledger Technology & Regulation
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Governance & DLT
“Code is Law”
Public ledger
Private ledger
Technical code Legal code
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Governance & DLT
Applicability of existing regulation
-International context
National law
Civil law(Contract law
Burden of proof)
Commercial law (corporate law, local
consumer protection)
EU law
Financial services
Data protection
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Smart Contracts“A piece of computer code that (a) is capable of monitoring, executing and enforcing an agreement (b) without the need for human interference or trusted intermediaries”
Complexity of contracts Anticipation of all scenarios Court decisions Contractual freedom is limited Mandatory provisions of law
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DLT & Regulation: the way forward
Regulator:Positioning & intervention
DLT innovation
Existing
regulation
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ESMA: DLT applied to securities marketsNot an opinion documentPreliminary analysis on the possible impact of DLTHow is DLT applied:
Mere tech improvement? Changing/replacing current
set up of market participants / infrastructure?
Benefits & challenges Focus on post trading activities :
Clearing & settlement Record keeping & reporting
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DLT applied to securities markets• National (corporate) law• Digitalization of securitiesIssuing
• EMIR 648/2012 – SFD 98/26• OTC derivatives (CCP’s)Clearing
• CSDR 909/2014 – SFD 98/26• Transferable securities (CSD’s)Settlement
• National law• Location of the ledgerSafe keeping
?DLT
?
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ESMA: DLT applied to securities marketsPost trading is highly regulated this may limit DLT’s deployment / potential benefits:
Speed up the processReduction of intermediariesReduction of costsMore efficient reconciliation
The existing framework is very embedded in the existing market infrastructureSo what’s next?
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DLT & Regulation: the way forward
« Ordonnance» n° 2016-520« mini-bons »
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Huge potential (DLT / smart contracts)
Existing regulation applicable on DLT
Regulatory innovation needed for a full deployment of the DLT
‘Tech’ & ‘Reg’ evolutions lay ahead of us
Take AwayDLT & Regulation…
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