Australian Regulator Wants to Monitor How Firms Use Blockchain Technology

ASIC: a blockchain needs to accommodate scenarios where the law doesn't permit enforcement of a contract by its own terms.

The Australian Securities & Investments Commission (ASIC) today released an information sheet on blockchain technology, entitled “Evaluating distributed ledger technology (DLT)”. It contains six questions that the regulator is likely to ask when assessing whether the use of a blockchain meets regulatory obligations.

These questions are:

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How will the DLT be used?;

What DLT platform is being used?;

How is the DLT using data?;

How is the DLT run?;

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How does the DLT work under the law?; and

How does the DLT affect others?.

Explaining the need for the move, ASIC says that in the last few years, there has been intense interest in DLT from operators of market infrastructure, financial institutions, services providers and fintech firms around the world.

Greg Medcraft

ASIC Chairman Greg Medcraft commented: “This info sheet is for both existing licensees and start-ups. It will help to fast track our discussions with stakeholders and we want to use the framework as a conversation starter as the technology continues to evolve.”

The most interesting part of the document is the one that relates to working under the law as it seems to greatly complicate using smart contracts.

It reads: “Although DLT can allow entities to transact without the need for external mechanisms for conflict resolution, the DLT-based service will remain subject to the legal and regulatory framework of the relevant jurisdiction. In Australia, as with many jurisdictions, there are scenarios where the legal system does not permit enforcement of a contract solely on its terms. The DLT will need to be flexible enough to accommodate this.”

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