FCA publishes feedback on DLT consultation

Written by Chris Lemmon
15/12/2017

The Financial Conduct Authority has published feedback on its discussion paper on distributed ledger technology (DLT), revealing that the UK regulator is open to all forms of deployment of the technology.

Earlier this year, the FCA announced that it was seeking stakeholder views of the development of DLT for the financial services sector. The FCA received 47 responses from various market participants including regulated firms, national and international trade associations, technology providers, law firms and consultancies.

The regulator was looking to explore ways in which DLT could impact financial services and the subsequent regulatory implications. It said that respondents expressed particular support for the FCA maintaining a ‘technology-neutral’ approach to regulation and welcomed the FCA’s approach to new technology, including its sandbox and RegTech initiatives.

Some respondents, however, doubted the compatibility of permissionless networks (which allow general public visibility of transactions online and are open for broad participation, compared to permissioned networks which typically feature a ‘gatekeeper’ who controls access). But the FCA stated that it is open to all forms of deployment, both permissioned and permissionless, provided the operational risks are properly identified and mitigated.

The FCA stated that it will continue to monitor DLT-related market developments, and keep its rules and guidance under review, working collaboratively with the industry, HM Treasury, the Bank of England, the Information Commissioner’s Office and other UK bodies.

Christopher Woolard, executive director of strategy and competition at the FCA, said: “The original paper opened a discussion about DLT, and the volume and breadth of responses we received from the industry demonstrates the significance of this issue. DLT has the potential to transform practices across a number of markets, sharpening competition and improving risk management.

“At the same time we have to be alive to the risks of certain applications of it. We will continue to work with a range of agencies and firms to ensure a coordinated approach to the use of DLT in financial services.”