[ S I B O S
you need to organise around roles,
and controls and governance systems
and ensure the same type of safe and
efficient environment.”
In a world where securities and
other assets become tokenised, some
have argued that an intermediary will
still need to issue them and create
rules.
Natural remit
Verbeke said that CSDs are aware
that some duties will fall to them and
others won’t. “Some of those roles
will fall into our natural infrastruc-
ture and we have made our mind up
that other stuff is out of our league,”
he added. “Our natural remit could
be anything around safety, notary
role, when you want someone to say
‘this is yours’.”
A new white paper from Deutsche
Bank, released at Sibos, highlighted
that Europe’s data protection laws
and the incoming CSD Regulation
(CSDR) might also have a significant
impact on the implementation of
DLT in the post-trade area. “CSDR
mandates that the ultimate record of
ownership of securities is to be main-
tained by a CSD. Only allowing CSDs
to issue or process securities trans-
actions clearing restricts the use of
blockchain for this purpose,” Polina
Evstifeeva, head of regulatory strate-
gy, GTB chief digital office, Deutsche
Bank told Securities@Sibos.
The core value of blockchain is that
it is decentralised and transparent,
but the white paper suggests these
values could also conflict with data
protection laws, which focus on the
importance of allowing personal data
to be removed or edited.
“Different jurisdictions define data,
its use and the necessary means of
protection in markedly different
ways,” added Evstifeeva. “In practice,
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this restricts the free flow of data
across borders and makes it chal-
lenging for one single solution to be
employed in all markets.”
The issue of determining what
jurisdiction and law should apply
is a challenging one when different
blockchain nodes may be in differ-
ent jurisdictions. “This may result
in different blockchain ecosystems
being created or, perhaps worse, we
may end up with multiple copies of
shared ledgers operating on different
technology platforms with differ-
ent database environments, leading
to time-consuming and expensive
reconciliation – exactly what the
technology is looking to circumvent,”
she noted.
However, the white paper does not
rule out the implementation of block-
chain by CSDs, suggesting the tech-
nology can be implemented through
a hybrid model in which the CSD can
either operate a blockchain platform
itself to perform the book entry role,
or it can continue to perform this
role off-chain, with the third-party
blockchain platform accessing those
records held by the CSD via an API
(application programme interface).
CSDs have so far eyed blockchain
technology for proxy voting and cor-
porate actions as a starting point, but
have yet to expand adoption of DLT
for services such as securities issuing
and settlement.
Evstifeeva explains cross-bor-
der regulation and industry-wide
standards on blockchain will help
encourage CSDs to utilise the full
benefits of the technology.
“As with all regulation pertaining
to technology, we stress the need for
technology-neutrality – regulating
the applications and outcomes of
blockchain, rather than the technolo-
gy itself,” she said.
January 2019
SecuritiesAtSibos.com
17