The Financial Industry Regulatory Authority (FINRA) on Wednesday issued a report that discusses the use and implications of DLT in the securities industry. The paper also seeks comments as part of an effort to obtain feedback on any challenges associated with the use and implementation of DLT.
Distributed ledger technology (DLT), better known as blockchain, has garnered significant interest in the securities industry, with many market participants indicating a desire for increased regulatory engagement as they explore the technology and its possible applications.
The paper, which is intended to be FINRA’s initial contribution to an ongoing dialogue with market participants about the use of DLT, provides an overview of the technology, highlights key applications and discusses implementation and regulatory considerations for broker-dealers, according to FINRA.
Among the applications addressed are those being used or tested in the equity, debt and derivatives markets, as well as shared utilities.
“Over the past couple of years, FINRA has actively engaged with market participants to monitor developments related to DLT and its potential impact in the securities industry,” says the report, from FINRA’s Office of Emerging Regulatory Issues. FINRA believes this early collaboration “will allow the industry to reap the benefits of the technology, while ensuring protection of investors and maintenance of market integrity.”
FINRA is requesting comments from all interested parties regarding all of the areas covered by this paper. FINRA also requests comments on any related matters for which it would be appropriate to consider additional guidance, consistent with the principles of investor protection and market integrity, based on DLT applications and their implications for FINRA rules.