I’m attorney Laura Anthony founding partner of Legal & Compliance, a full service corporate,
securities, and business transactions law firm.
Today is the first in a LawCast series talking about distributed ledger technology, or B;ochchain.
On July 13, 2017, FINRA held a Blockchain Symposium to assess the use of distributed
ledger technology, or DLT, in the financial industry, including the maintenance of shareholder
and corporate records.
DLT is commonly referred to as blockchain.
The symposium included participation by the Office of the Comptroller of Currency, the
US Commodity Futures Trading Commission or CFTC, the Federal Reserve Board and the SEC.
FINRA also published a report earlier in the year discussing the implications of DLT for
the securities industry.
Delaware, Nevada and Arizona have already passed statutes allowing for the use of DLT
for corporate and shareholder records.
This is the first in many LawCasts that will discuss DLT as this exciting new era of technology
continues to unfold and impact the securities markets.
I will summarize the recent recent SEC investigative report on initial coin offerings and conclusion
that cryptocurrencies can be a security.
I will also be completing a LawCast series summarizing the state blockchain legislation
to date, including Delaware’s groundbreaking statute.
Blockchain is an openly distributed database which is used to continuously maintain a list
of records, called blocks.
Each new block is linked to prior blocks in such a way the data cannot be retroactively
changed in a prior block without changing all blocks, which is virtually impossible,
although technology is being developed to correct prior transactions on the chain.
A DLT ledger is shared among network participants, instead of relying on a single central ledger.
The blockchain technology could be used to maintain shareholder records in a secure immediate
form as well as to process capital markets trades instantaneously.
It is thought that stock ledgers and any transfers would be updated instantaneously, effectively
allowing for T+0 settlement of trades without the need for intermediaries.
A change of this magnitude in our trading markets is many years away as effective regulation
and consideration on market impacts will take some time.
However, many top transfer agents are already developing blockchain systems for shareholder
records and some will be available for testing within a matter of months.
The technology is already being utilized, most notably by the cryptocurrency industry.
At least one industry leader, Overstock CEO Patrick Byrne’s t0 Technologies, has created
a system that could form the basis for widely used blockchain technology which disrupts
the capital market trading systems.
I don’t expect quick changes to trading systems and settlement.
Blockchain remains widely unregulated and without consensus from top financial regulators,
any change to capital market structures will face roadblocks.
However, I expect that the ability for public companies to maintain stock ledgers using
DLT technology will be forthcoming very soon.
I’m securities attorney Laura Anthony, founding partner of Legal & Compliance, and producer
of LawCast.
Should you have any questions about today’s topic, please visit SecuritiesLawBlog.com
and LawCast.com, or contact me directly.
Inquiries of a technical nature are always encouraged.