Out-Law News 1 min. read
23 Aug 2016, 10:05 am
Financial services and technology law specialist Luke Scanlon of Pinsent Masons, the law firm behind Out-Law.com, said it was noteworthy that UK regulator the Financial Conduct Authority (FCA) had highlighted blockchain-based applications as having the potential to help financial firms meet their regulatory obligations.
According to the Financial Times, FCA director of strategy and competition Christopher Woolard said the regulator believes blockchain has "some potentially interesting applications" and that the FCA is "talking to firms thinking about how to apply that to financial services and how it could benefit consumers or indeed make the business of compliance easier".
Woolard said that the FCA could look to "encourage" the development of blockchain-based solutions, according to the Financial Times' report. He said the FCA could provide authorisation to a "small but significant number of firms" using blockchain technology via its regulatory sandbox initiative, the Financial Times said.
The FCA opened its regulatory sandbox scheme earlier this year. The project will allow financial firms and technology companies to test innovative products, services, business models and mechanisms of delivery under a light-touch regulatory framework. Applications for the first wave of testing under the scheme closed in early July.
The regulator has also stated that it has "an active role to play" in helping to support developments in regulatory technology (regtech). Earlier this summer it revealed it intends to work with companies to help them develop technology that can support regulatory compliance in the financial services sector.
Scanlon said: "It is interesting to see that the regulator has highlighted regulatory compliance as an example of a shorter term application for blockchain technology. There is a lot of potential for distributed ledgers to be used in simplifying all aspects of automation of regulatory reporting and data sharing between regulators and regulated entities."
"Whether distributed ledgers are the answer or not, the discussion is leading to more interest in the topic of regtech and to investigations of solutions that could drastically reduce the cost of compliance," he said.