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SEC Chair: Blockchain Could Replace Current Trading Clearing and Settlement

by Avi Mizrahi
  • The SEC is "closely monitoring the proliferation of this technology and already addressing it in certain contexts. "
SEC Chair: Blockchain Could Replace Current Trading Clearing and Settlement
Mary Jo White SEC Chair (Bloomberg)
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High ranking financial figures are one by one addressing the disruptive potential of Blockchain recently. Soon after a CFTC Commissioner said the technology could have prevented the collapse of Lehman Brothers and called on regulators around the world to let blockchain and smart contracts develop freely, another American official echoed the sentiment.

The Chairwoman of the U.S. Securities and Exchange Commission Mary Jo White spoke at the SEC’s and Rock Center’s Silicon Valley Initiative in Stanford University in San Francisco and touched upon the promises of blockchain and distributed ledgers. The event was attended by regulators, academics, lawyers and entrepreneurs to discuss issues regarding FinTech startups, venture capital and private equity.

The SEC Chair said: “Blockchain technology has the potential to modernize, simplify, or even potentially replace, current trading and clearing and settlement operations. As you know, blockchain or distributed ledger is a database comprised of unchangeable transaction data in packages called blocks; each block in the chain is a record of transactions and contains information about the previous transactions. We are closely monitoring the proliferation of this technology and already addressing it in certain contexts. For example, Corporation Finance staff recently reviewed the registration statement of a company seeking to offer and sell digital securities, eliminating the need for intermediaries and allowing settlement on a nearly instantaneous basis.

One key regulatory issue is whether blockchain applications require registration under existing Commission regulatory regimes, such as those for transfer agents or clearing agencies. We are actively exploring these issues and their implications. Our Advanced Notice of Proposed Rulemaking and Concept Release on transfer agent regulations issued last December, for example, asked for public comment on the use of blockchain technology by transfer agents and how such systems fit within federal securities regulations. The insight from the comment process will help us evaluate how to best regulate these new innovations, and we encourage comment from all constituents.”

High ranking financial figures are one by one addressing the disruptive potential of Blockchain recently. Soon after a CFTC Commissioner said the technology could have prevented the collapse of Lehman Brothers and called on regulators around the world to let blockchain and smart contracts develop freely, another American official echoed the sentiment.

The Chairwoman of the U.S. Securities and Exchange Commission Mary Jo White spoke at the SEC’s and Rock Center’s Silicon Valley Initiative in Stanford University in San Francisco and touched upon the promises of blockchain and distributed ledgers. The event was attended by regulators, academics, lawyers and entrepreneurs to discuss issues regarding FinTech startups, venture capital and private equity.

The SEC Chair said: “Blockchain technology has the potential to modernize, simplify, or even potentially replace, current trading and clearing and settlement operations. As you know, blockchain or distributed ledger is a database comprised of unchangeable transaction data in packages called blocks; each block in the chain is a record of transactions and contains information about the previous transactions. We are closely monitoring the proliferation of this technology and already addressing it in certain contexts. For example, Corporation Finance staff recently reviewed the registration statement of a company seeking to offer and sell digital securities, eliminating the need for intermediaries and allowing settlement on a nearly instantaneous basis.

One key regulatory issue is whether blockchain applications require registration under existing Commission regulatory regimes, such as those for transfer agents or clearing agencies. We are actively exploring these issues and their implications. Our Advanced Notice of Proposed Rulemaking and Concept Release on transfer agent regulations issued last December, for example, asked for public comment on the use of blockchain technology by transfer agents and how such systems fit within federal securities regulations. The insight from the comment process will help us evaluate how to best regulate these new innovations, and we encourage comment from all constituents.”

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