Developing Blockchain Real-Time Clearing and Settlement in the EU, U.S., and Globally
Columbia Journal of European Law: Preliminary Reference (June 22, 2016)
11 Pages Posted: 12 Jul 2016
Date Written: June 22, 2016
Clearing and settlement of international securities transactions for indirectly held securities presents major challenges as the immense potential of blockchain technology creates the possibility of a tamper-proof consolidated audit trail, of almost infinitesimal transaction cost, and increased transactional velocity. While true real-time clearing and settlement will remain utopia for the foreseeable future, disruptive fintech innovations are being tested by major financial institutions around the globe as realization takes hold that critical mass is not a limiting criterion in a cloud-based blockchain world. But while technology develops virtually at the speed of IT-based innovation, banks realize the threat of losing control of payment systems and the notion of negative float is dwindling toward zero, exposing banks to additional risks and challenges to liquidity and collateral management in order to be able to make technologically possible instant payments. At the same time, the regulatory framework both in the U.S and the EU lags alarmingly behind the pace of technology as sudden institutional and supervisory concerns about Bitcoin and other cryptocurrencies have showed. While blockchain technology is not only capable of revolutionizing payments, clearing, and settlement, but indeed any form of transaction processing or verifiable vote, it raises issues of data protection, BigData processing, but also of identifying systemic payment risks. While both U.S. and EU regulators have shown valuable and highly appropriate restraint so as not to throttle innovation, regulation and oversight remain conditions precedent to broad-based use and safe application.
Keywords: Clearing, Settlement, Blockchain Technology, Securities Transactions, Consolidated Audit Trail, Hague Securities Convention, Geneva Securities Convention, Cryptocurrencies
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