FCA opens investigation into the potential for blockchain in financial services

FCA looking for answers over the question of blockchain and distributed ledger technology in financial services

The Financial Conduct Authority (FCA) is investigating the potential uses of blockchain in financial services and has called on software vendors specialising in distributed ledger technology, and users, to contribute their expertise.

The organisation said it was particularly interested in exploring where the balance of risk and opportunities may lie in relation to distributed ledger technology.

A 33-page discussion paper on distributed ledger technology has been published by the FCA, covering what it understands are the key risks of blockchain, under the topics of:

• Governance and technology resilience;
• Distributed ledger technology and distributed data;
• Record-keeping and auditability;
• Smart contracts; and,
• The use of digital currencies to deliver financial services.

The paper also covers a section on distributed ledger technology's compatibility with the existing regulatory framework. Each section includes questions that the FCA would like responses to from customers and vendors of blockchain-based technologies.

"Distributed ledger technology is an example of rapidly developing technology which offers exciting potential to support the needs of consumers and the market.

Distributed ledger technology may also present new challenges and potential risks. For example, how regulated firms allocate responsibilities for systems shared among them," said the FCA.

"We generally take a ‘technology neutral' approach to regulating financial services and are interested in considering whether there is anything distinctive about distributed ledger technology, which would require us to take a different approach," it added.

Responses to the discussion paper should be submitted by 17 July 2017.

After reviewing the respones, the FCA may publish a summary of responses, or could release a consultation paper.

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