Blockchain Breakfast – Summer 2016Regulatory Briefing

2

Distributed Ledger Technology & Regulation

3

Governance & DLT

“Code is Law”

Public ledger

Private ledger

Technical code Legal code

4

Governance & DLT

Applicability of existing regulation

-International context

National law

Civil law(Contract law

Burden of proof)

Commercial law (corporate law, local

consumer protection)

EU law

Financial services

Data protection

5

Smart Contracts“A piece of computer code that (a) is capable of monitoring, executing and enforcing an agreement (b) without the need for human interference or trusted intermediaries”

Complexity of contracts Anticipation of all scenarios Court decisions Contractual freedom is limited Mandatory provisions of law

6

DLT & Regulation: the way forward

Regulator:Positioning & intervention

DLT innovation

Existing

regulation

7

ESMA: DLT applied to securities marketsNot an opinion documentPreliminary analysis on the possible impact of DLTHow is DLT applied:

Mere tech improvement? Changing/replacing current

set up of market participants / infrastructure?

Benefits & challenges Focus on post trading activities :

Clearing & settlement Record keeping & reporting

8

DLT applied to securities markets• National (corporate) law• Digitalization of securitiesIssuing

• EMIR 648/2012 – SFD 98/26• OTC derivatives (CCP’s)Clearing

• CSDR 909/2014 – SFD 98/26• Transferable securities (CSD’s)Settlement

• National law• Location of the ledgerSafe keeping

?DLT

?

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ESMA: DLT applied to securities marketsPost trading is highly regulated this may limit DLT’s deployment / potential benefits:

Speed up the processReduction of intermediariesReduction of costsMore efficient reconciliation

The existing framework is very embedded in the existing market infrastructureSo what’s next?

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DLT & Regulation: the way forward

« Ordonnance» n° 2016-520« mini-bons »

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Huge potential (DLT / smart contracts)

Existing regulation applicable on DLT

Regulatory innovation needed for a full deployment of the DLT

‘Tech’ & ‘Reg’ evolutions lay ahead of us

Take AwayDLT & Regulation…

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