The U.S. Financial Industry Regulatory Authority (FINRA) is looking to uncover the potential risks of distributed ledger technology (DLT), which is attracting plenty of hype as a way to enhance the speed and efficiency of back-office processing in the global securities industry.
FINRA issued a paper on Wednesday that examines the possible implications of the adoption of DLT, also known as blockchain technology. The regulator is also seeking comment on any challenges associated with the implementation of DLT.
“Over the past couple of years, FINRA has actively engaged with market participants to monitor developments related to DLT and its potential impact in the securities industry,” says the report, which was issued by FINRA’s Office of Emerging Regulatory Issues.
The report provides an overview of the technology, highlights its possible applications, and regulatory considerations for broker-dealers.
FINRA says it welcomes an open dialogue with the industry to identify “any potential risks or hurdles in order to tap into the full potential of DLT, while maintaining the core principles of investor protection and market integrity.”
The paper, which is out for comment until March 31, represents the self-regulatory organization’s initial contribution to an ongoing dialogue with the industry about the use of DLT.