Smart Contracts for Securities Transactions on the DLT Platform (Blockchain): Legal Obstacles and Regulatory Challenges

30 Pages Posted: 7 Feb 2020 Last revised: 24 Feb 2020

See all articles by Joseph Lee

Joseph Lee

School of Law, University of Exeter

Date Written: January 31, 2019

Abstract

In this paper, the author discusses how smart contracts can be used for securities transactions on the DLT network. First, the author discusses the legal nature of tokenised securities (crypto assets) encoded into smart contracts and argues that the legal basis of the underlying assets will continue to govern the rights of the holders. Transfers of tokenised securities also have contract law implications. There are several legal risks involved in such transfers, and there can be systematic failures if these risks are not mitigated. The author proposes to introduce a central counter party (CCP) system to mitigate these risks. Secondly, the author discusses how conflict of laws issues can affect market safety on the platform and also affect regulatory oversight. The author discusses the difficulties for market surveillance and enforcement proceedings involved in this cross-border securities trading platform. Thirdly the author discusses how this platform will affect current market practices such as securities lending and proxy voting. Despite any difficulties, there are also positive effects for individual investors.

Keywords: smart contract, DLT, blockchain, crypto assets, securities trading, ICO, tokenization

Suggested Citation

Lee, Joseph, Smart Contracts for Securities Transactions on the DLT Platform (Blockchain): Legal Obstacles and Regulatory Challenges (January 31, 2019). Available at SSRN: https://ssrn.com/abstract=3523317 or http://dx.doi.org/10.2139/ssrn.3523317

Joseph Lee (Contact Author)

School of Law, University of Exeter ( email )

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Exeter, Devon EX4 4QJ
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44(0)1392 725548 (Phone)

HOME PAGE: http://socialsciences.exeter.ac.uk/law/staff/jlee/

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