Blockchain and the Future of Financial Market Infrastructures

Abstract

Abstract This chapter analyses new regulatory challenges posed by new forms of the digitization of financial instruments, on the basis of blockchain and distributed ledger technology (DLT). While real-world examples for the problems posed by these new technologies continue to be rare, the chapter discusses the various forms for the digitization of financial instruments and transactions currently available. Against this backdrop, it illustrates the difficulties to adequately address the new phenomena within the existing regulatory frameworks. In many jurisdictions, traditional concepts of securities law do not (yet) provide for digitized instruments, while European financial markets regulation, depending on the design of individual trading platforms and transactions, already facilitates the establishment of new platforms trading in such instruments. However, the decentralized nature of blockchain-based financial instruments and trading transactions clearly comes with substantial challenges for residual regulatory strategies, which rely on the regulation of market operators as guardians for the preservation of market stability and investor protection. Similar problems are identified with regard to the providers of securities settlement systems.