14 Feb 2020
In this article we'll present the official stance of Australian Government and Australian Securities & Investments Commission towards blockchain and distributed ledger technologies.
In recent years DLT distributed ledger technology and blockchain are gaining popularity and becoming mainstream. On FEB 2020 ASIC has released Information Sheet (INFO 219) in which they created a list of guidelines to be able to easily check if their use of DLT is meeting all regulatory obligations.
Idea is to analyze DLT as a decentralised secure database in which many confidential data are kept this data is usually about transactions also if ledger is public than there transaction are visible to anyone within the network.Because this system is made based on distrust of parties there are number of possible use cases in the finance space; like foreign exchange, cross border payments, securities settlement systems and debt insurance programs.
Because DLT is getting more popular than ASIC, setting a list of basic tests to judge is necessary for that business. Because today there are many subventions intended for this kind of system.
Evaluating distributed ledger technology
1. How will the DLT be used?ASIC requires every developer to give reasons why do they think that it’s necessary for them to use DLT what is exactly the problem and assessment of the current market landscape that is being targeted.Together with this there must be given a list of rules to access the DLT service, what are main features of design,which kind of information will be stored and will smart contracts be implemented.
2. What is the purpose of DLT platform?ASIC requires to be supplied with reasons why developers have chosen to implement DLT on their platform and how they have tested it as DLT platform must be robust, reliable and secure.
3. How the data will be used?DLT is all due essence one big ledger as such is the case, ASIC demands to know the sources where the data is coming from, how developers plan to protect it, what are the security arrangements set in place to enable users & regulators their privacy.
4. DLT explanation?ASIC must be supplied with details on which game theory developers decided to use i.e. which are the rules that govern user interaction inside of the system, how ownership is defined and who is in control of service. What is the type of consensus mechanism that is implemented inside the system so users can easily determine what is a true record and what is a way to detect inconsistency.
5. DLT and the Australian law?ASIC demands detail and how this system will be flexible enough to adapt to new legal and regulatory frameworks that are going to be set in place.
6. Consequences of DLT implementation on a wider market?ASIC needs to deliver a short analysis of how their DLT service will affect broader markets and see how their success or failure would affect those not directly engaged with the service. What steps have been taken to create good exchange of information between service and others. Was there any consideration to the management, a customer, participant or the service provider.
Aleksandar JELIC s