Securities, Intermediation and the Blockchain - An Inevitable Choice between Liquidity and Legal Certainty?

Abstract

The practice of securities holding, transfer and collateral has significantly changed over the past 200 years –moving from paper certificates and issuer registers to an intermediated environment, and from there to computerisation and globalisation. These changes made transacting more efficient and thus rendered markets more liquid. However, the law has lagged behind and is now itself an obstacle to efficiency because international securities transactions are subject to considerable legal uncertainty. The latest global market development, a cryptographic transfer process commonly called ‘the blockchain’, is the most recent efficiency-enhancing change. It offers a unique possibility to create a consistent legal framework for securities from scratch, on the basis of a legal concept that to some extent resembles bearer securities. This paper shows what the new international legal framework could look like, in the light of experience gained from earlier developments.

Keywords: Securities, Liquidity, Intermediation, Globalisation, Property, Blockchain, Harmonisation of commercial law

JEL Classification: K11; K22; K33