In April 2017, the Financial Conduct Authority (FCA) initiated a market dialogue focused on the risks and opportunities associated with the transformational potential of Distributed Ledger Technology (DLT) in financial services and its compatibility with existing regulatory frameworks.
The FCA continues its ‘wait-and-see’ approach before considering changes to its framework. It will instead explore emerging business models and continue to help innovators test-bed solutions in its regulatory sandbox.
With a voluntary standards process underway via ISO and increasing regulatory accommodation, end-users will be more accepting of the increasing trust that DLT affords, allowing benefits around efficiency, transparency and provenance to be fully realised. This much is very encouraging for UK DLT and cements the UK’s position as a global fintech hub with a forward-looking regulatory regime. techUK welcomed the opportunity therefore to respond to the FCA’s discussion paper.
techUK convened a roundtable with members and FCA officials in the run up to submission. The response makes points around:
- Until guidance emerges, regulation on a case-by-case basis, facilitated when appropriate by the industry sandbox, is the right approach in order to remove barriers to innovation
- The meaning of technology neutrality to maintain competition & innovation whilst also ensuring the resilience of systems in future
- The need for regulatory cooperation spurred by the emerging intersect between consumer facing products within the remit of the FCA and other regulated activities
- Experimentation on the creation of a regulatory node for live DLT reporting
- Discussion on consumer protection in response to frothy crypto-currency markets and the emergence of Initial Coin Offerings (ICOs)
Members can download techUK’s response below in addition to the FCA’s discussion paper. The deadline for submissions is 17 July. techUK’s DLT Group will explore issues around the resilience of DLT systems and the need for regulatory cooperation in Q3 and Q4.