Exchanges see unclear regulation as barrier to blockchain adoption

Exchanges see unclear regulation as barrier to blockchain adoption

Exchange operators consider  the lack of clarity over blockchain use and regulation a key problem for the adoption and development of such technology in the capital markets, according to a survey report on the distributed ledger technology (DLT), ie blockchain, conducted by the World Federation of Exchanges (WFE).

The survey founds that where non-financial, unregulated entities lead in DLT development, regulators will need to ensure that equivalent regulatory standards and protections are maintained.  Data privacy laws, data governance considerations, conflict of laws issues, intellectual property laws, and investor protection laws are just some of the issues that need to be looked at.

“Respondents stressed the importance of adopting a collaborative approach to a technology that was still evolving,“ the report read. “Financial Market Infrastructures (FMIs) are uncertain about the extent to which the technology will live up to its promise.”

Survey participants pointed that several risks related to blockchain technology need to be addresses – risks of maintaining security standards across a decentralised database, legal and regulatory uncertainty, and concerns around scalability.

Meanwhile, 21 out of 25 respondents said they were either investigating the applicability of DLT to their environment or actively pursuing DLT initiatives. In fact, the number of FMIs that are investigating and deploying DLT proof-of-concepts and solutions will continue to increase. The main advantages that attract them to using such technology  include cost savings, efficiency enhancement and risk reduction.

The survey included 24 exchanges, clearing and settlement houses, all members of the WFE. It was conducted in collaboration with the International Organisation of Securities Committees (IOSCO). The full report could be viewed here.

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