In April 2017, the FCA published Discussion Paper 17/03: Distributed ledger technology (DLT) (DP17/03).The purpose of DP17/03 was to stimulate a dialogue on the regulatory implications of current and potential developments of DLT in the financial markets.
The FCA has now published Distributed ledger technology: Feedback statement on DP17/03 (FS17/03).
The FCA notes that the respondents to DP17/03 were supportive of the FCA’s technology-neutral approach to regulation and welcomes its open and proactive approach to new technology, including the Sandbox and RegTech initiatives. The feedback received also suggested that the FCA’s current rules are flexible enough to accommodate the application of various technologies, including the use of DLT by regulated firms. Nearly all respondents generally agreed that there are no substantial barriers to adopting DLT under the FCA’s regulatory rules and no changes to specific rules were proposed.
The FCA concludes, that overall it is open to all forms of deployment of DLT provided that operational risks are properly identified and mitigated.
In terms of next steps, the FCA will:
- continue to monitor DLT-related market developments, and keep its rules and guidance under review in the light of those developments, although the FCA has not identified a need to propose specific rule changes at this juncture;
- continue with its close engagement with DLT use cases and industry stakeholders through its Innovate initiative;
- work closely with national and international regulatory bodies to shape regulatory developments and standards; and
- engage further with other regulatory authorities to ensure a coordinated approach in the UK.
The FCA also states that having already issued an alert warning consumers of the speculative nature and high risks of initial coin offerings (ICOs), it will gather further evidence on the ICO market and conduct a deeper examination of developments.
The findings will help the FCA determine whether or not there is a need for further regulatory action in this area. In chapter 3 of FS17/03 the FCA has taken the immediate step of highlighting how an ICO-related innovative business proposition needs to be designed if it is to satisfy the “consumer benefit” criterion for access to the facilities of its Innovation Hub.
View FCA feedback statement on distributed ledger technology, 15 December 2017