Potential uses for blockchain to grow ‘exponentially’: ASIC

Corporate watchdog issues guide for companies considering the use of blockchain-inspired distributed ledger technology

The Australian Securities and Investments Commission (ASIC) says it expects the range of potential uses of blockchain-style distributed ledger technology (DLT) to grow “exponentially” over time.

“To date, we have seen DLT used in foreign exchange remittance payments, securities settlement systems, debt issuance programs and digital identity initiatives,” an information sheet published by the corporate watchdog said.

“Internationally, DLT is being deployed in an even wider range of use cases including arrangements to support private securities transactions, interbank payments, and netting services for repo and foreign currency markets.”

“This info sheet is for both existing licensees and start-ups,” ASIC chairperson Greg Medcraft said in a statement. “It will help to fast track our discussions with stakeholders and we want to use the framework as a conversation starter as the technology continues to evolve.”

In Australia, two of the high-profile examples of businesses considering the technology, cited yesterday by Medcraft during a speech at ASIC’s annual forum, are the ASX and the Commonwealth Bank.

The ASX is assessing DLT as a replacement for CHESS, which provides equity post-trade services. The Commonwealth Bank has experimented with a range of blockchain-inspired solutions including issuing bonds and smart contracts.

The ASIC information sheet and an associated assessment tool are intended to provide a guide to firms considering the adoption of distributed ledgers.

ASIC said it believes that at this stage the “existing regulatory framework is able to accommodate the DLT use cases we have seen”.

“However, as DLT matures, we anticipate that additional regulatory considerations may arise,” the guidance produced by ASIC states. “These are most likely to be resolved with early and collaborative dialogue between ASIC and the industry.”

ASIC offers six key top-line questions to consider when adopting DLT:

• How will the DLT be used?
• What DLT platform is being used?
• How is the DLT using data?
• How is the DLT run?
• How does the DLT work under the law?
• How does the DLT affect others?

“These questions are asked in the context of the existing requirement for infrastructure operators, and financial services and credit licensees, to have adequate technological resources, risk management arrangements, and adequate human resources,” ASIC said.

“We consider this includes having the expertise to understand the technology and ensure any risks are able to be identified and mitigated.”

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