Exchanges call for
regulatory clarity over blockchain use
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[August 25, 2016]
LONDON (Reuters) - A lack of clarity
over regulation is holding back the development of blockchain technology
for cutting the cost of share trading, the world's trade body for
exchanges said on Thursday.
The World Federation of Exchanges (WFE) asked its members about
their plans to use blockchain, a tamper-proof shared ledger that can
automatically process and settle transactions using computer algorithms,
with no need for third party verification.
This week more big banks, among the main customers of exchanges, piled
into blockchain development because of the savings it could potentially
The WFE said blockchain was likely to have its biggest use in clearing
and settlement, whereby the paperwork of a trade is completed and legal
ownership of the security is swapped for cash.
"Financial market infrastructures are uncertain about the extent to
which the technology, particularly as applied to capital markets, will
live up to its promise," the WFE said in a statement.
"They also highlighted several risks that need to be addressed such as
risks of maintaining security standards across a decentralized database,
legal and regulatory uncertainty, and concerns around scalability."
Blockchain looks to combine elements of trading, clearing and settlement
but current legal and regulatory rules treat each of those separately,
the WFE said.
Vested interests in the preservation of the existing system was also a
barrier to developing blockchain, the WFE said.
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Styrofoam bull figurines are pictured at the Frankfurt's stock
exchange, Germany, December 17, 2015. REUTERS/Ralph Orlowski
The WFE survey was based on responses from 24 exchanges, clearing and settlement
houses such as CME Group, Deutsche Boerse, China Financial Futures Exchange,
LCH.Clearnet, Japan Exchange Group, Nasdaq and Singapore Exchange.
Many exchanges and clearing houses are already looking at how they could use
blockchain to avoid being sidelined.
The survey was conducted in conjunction with a consultative committee of IOSCO,
the global umbrella group for securities markets regulators who are studying the
implications of blockchain.
(Reporting by Huw Jones; Editing by Adrian Croft)
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