The regulator said it needs to consider whether DLT, which includes ‘blockchain’ technology, requires a change of regulatory approach.
In a discussion paper published today, the FCA said DLT is a “rapidly developing technology which offers exciting potential to support the needs of consumers and the market”.
Blockchain technology could be used across all stages of the mortgage industry in future – for example allowing lenders and brokers to update ledgers automatically, immediately and transparently.
DLT has the potential to offer, for example, digitised assets that can be delivered directly to consumers and legal agreements that can be composed in software.
Under the FCA’s Project Innovate, providers have been testing products in the regulatory ‘Sandbox’. The FCA said efforts to investigate DLT solutions have been especially concentrated over the last 24 months and in the second half of 2017 it expects to see movement from proof of concept to real world deployments.
“DLT may also present new challenges and potential risks,” it said. “For example, how regulated firms allocate responsibilities for systems shared among them.”
While the FCA is ordinarily ‘technology neutral’, it said it is interested in considering whether there is anything distinctive about DLT that would require a different approach.
“DLT’s potential, combined with processing speed (the likes of which has not yet been seen), might suggest that aspects of existing rules may need to be reviewed in the light of this new technological context,” said the paper.
In a speech today at the Innovate Finance Global Summit for UK FinTech Week, Christopher Woolard, executive director of strategy and competition at the FCA, said the regulator is asking its Innovate team to do more to lead the conversation about emerging trends and innovations.
“It is our job to provide the conditions that simplify regulatory complexities and give space for firms to innovate,” he said.
“But, ultimately, we need firms to continue to push the boundaries of competition and innovation for our approach to work. We’ve already seen hundreds of firms exploring ideas and dozens coming to market, but we need to still have more.”