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By: V. Basil Hans.
Research Professor, Department of Management & Commerce, Srinivas University, Mangaluru, Karnataka, India
One of the most promising uses of blockchain technology in financial markets is to modernize securities settlement procedures. Centralized intermediaries, like clearing houses and custodians often cause delays, operational inefficiencies, and counterparty risk in traditional settlement systems. Blockchain, or distributed ledger technology (DLT), can completely change this infrastructure by making real-time, peer-to-peer settlement possible, increasing transparency, and making recordkeeping unchangeable. This article looks at the legal, regulatory, and operational effects of using blockchain in securities settlement. It looks at how DLT-based models go against current legal ideas of “finality,” “ownership,” and “control” under U.S. securities law and international rules, like the EU’s Central Securities Depositories Regulation. The article also looks at current pilot programs, such as the Depository Trust & Clearing Corporation’s Project Ion and the European Central Bank’s DLT projects. It looks at both their technological potential and the regulatory problems they face. The essay contends that blockchain can enhance settlement efficiency and mitigate systemic risk; nevertheless, it simultaneously introduces intricate issues related to jurisdiction, data governance, and responsibility within decentralized networks. The report ends by suggesting a hybrid regulatory structure that strikes a compromise between protecting investors and promoting innovation, which will lead to a safe and efficient future for blockchain-based settlements.
Blockchain technology, securities settlement, distributed ledger (DLT), financial regulation, market infrastructure
Citation:
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