Financial technologies like the block chain and related distributed ledger platforms are the source of much discussion and debate in today’s legal and finance industry publications. Some commentators feel that these technologies will be completely revolutionary, while other commentators feel that “the fad” will pass. And, of course, there are those commentators advocating a position that is somewhere in between those two poles – namely, that the financial technology will help to make the financial markets operate in a more efficient manner (i.e., make “the plumbing” work better), but not necessarily rise to the level of completely revolutionary.
While that commercial debate continues to evolve, members of the legal profession involved in various regulatory disciplines – securities , commodities, banking, etc. – engage in dialogue about the application of the existing statutory framework and regulatory principles to these new technology-based products and services. And, it is fair to say, that such dialogue usually results in conclusions that can be described as conclusory (or, if you prefer, anything but conclusive). The fact is that the law still needs to evolve and this evolutionary process is in its embryonic stage and trending toward nascent.
Inevitably, in this sort of a situation, many market participants will emerge with a wide variety of products and services. In many cases, the products and services will not subject those participants directly to regulation, since the laws and regulations may not contemplate the products and services made available by the technology. Although, it is likewise inevitable that many of these unregulated market participants will eventually (if not immediately) seek to offer their products and services to market participants that are highly regulated.
The paradox is clear: a technology rooted in a decentralized currency is giving birth to an unregulated class of market participants that may benefit greatly from a deep and sophisticated understanding of the regulations that will impact their biggest prospective customers. Market is as market does.
Good day. Good times to be thinking about these things. DR2