Blockchain, Securities Markets, and Central Banking

Distributed ledger technology, a variant of which is blockchain technology, represents one of the most important innovations of the FinTech revolution. Academics, policy-makers, and market participants are experimenting with the technology with the aim of enhancing the functioning of financial markets. Industry consortia are being formed by the biggest financial institutions in the world seeking to leverage the use of the technology, in order to improve the clearing and settlement process. Furthermore, central banks in advanced and developing economies are examining the potential of using the technology in market infrastructures operated by central banks and are even exploring the possibility of issuing digital base money. Nevertheless, the widespread adoption of distributed ledger technology as envisioned by its ardent supporters encounters considerable legal obstacles, including the numerous new regulations imposed on financial markets and market participants in the aftermath of the Global Financial Crisis. This chapter seeks to disentangle the myths from the realities of the so-called distributed ledger technology or blockchain revolution and discusses how the legal regime can act both as an impediment and a catalyst to the widespread adoption of the technology.