Will the Federal Government Establish Policy Regarding Blockchain Technology?
The Federal Reserve Board recently published a research paper entitled, “Distributed Ledger Technology in Payments, Clearing and Settlement.” While not necessarily groundbreaking, the report signals that the federal government is moving towards establishing a national policy regarding blockchain technology.Several years ago, the Federal Reserve indicated that it did not have any plans to regulate digital currency. However, that doesn’t mean the board isn’t paying attention. This fall, Federal Reserve chairwoman Janet Yellen acknowledged the potential of blockchain in remarks before the House Committee on Financial Services. She said, “It could have very significant implications for the payments system and the conduct of business. We want to foster innovation. I think innovation using these technologies could be extremely helpful and bring benefits to society.”
Distributed Ledger Technology
The Federal Reserve report focuses on distributed ledger technology (DLT), which the Fed acknowledges is an imprecise term referring to a “combination of components including peer-to-peer networking, distributed data storage, and cryptography that, among other things, can potentially change the way in which the storage, recordkeeping, and transfer of a digital asset is done.”
The research paper focuses on how the technology can be used in the area of payments, clearing, and settlement, as well as its broader impact on financial markets. It is the product of consultations with 30 key industry stakeholders, including market infrastructures, financial institutions, other government agencies, technology firms, and industry consortia.
“As part of its core objective to foster the safety and efficiency of the payment system and to promote financial stability, the Federal Reserve has a public policy interest in understanding and monitoring the development of innovations that could affect the structural design and functioning of financial markets,” the report states.
Application of the Technology
The Federal Reserve highlights that DLT presents a wealth of opportunities for improving financial transactions, although it is still in its early development stages. “The driving force behind efforts to develop and deploy DLT … is an expectation that the technology could reduce or even eliminate operational and financial inefficiencies, or other frictions, that exist for current methods of storing, recording, and transferring digital assets throughout financial markets,” the report states.
Despite the promise of DLT, the Federal Reserve report notes that the technology must clear several hurdles before it can be widely adopted. Among the challenges that may hamper the practical implementation and potential long-term adoption of blockchain technology, the Federal Reserve cites several business, technology, risk management, and financial design challenges. With regard to risk management, the blockchain report explores a number of business law concerns, including the licensing of companies that provide DLT services, ownership of digital assets, compliance with the Bank Secrecy Act (BSA) and anti-money-laundering (AML) requirements, and the finality of settlements.
For businesses interested in learning more about blockchain technology, the Federal Reserve paper provides a comprehensive overview of the fundamentals. It also surveys many of its potential applications, as well as the potential risks and benefits. As far as future regulation of distributed ledger technology, it appears that the Federal Reserve wants to see how the technology evolves over time before launching an official rulemaking.
This post is a part of a series focusing on blockchain technology, bitcoin and cryptocurrency – more on this can be found below:
Portability of estate and gift tax enables a surviving spouse to inherit any unused portion of their deceased spouse’s federal estate and gift tax exemption. So, if one spouse doesn’t utilize their full exemption, the surviving spouse can effectively double their exemption amount with regard to estate tax liability. For married couples, portability offers a […]
Pet Trusts in New Jersey and New York: A Practical Estate Planning Tool
For many of us, pets are more than companions—they are members of the family. Yet they are often overlooked or inadequately provided for when it comes to estate planning. A pet trust offers a legally enforceable way to ensure that your animal continues to receive proper care if you become incapacitated or pass away. As […]
For many New Jersey business owners, a closely held company represents decades of work, financial investment, and personal sacrifice. Trusts in business succession planning are one of the most effective tools for protecting that value, allowing founders to control how and when the business passes to the next generation while reducing the risk of disputes, […]
Read Before You Sign: IT Contract Pitfalls Every NJ Business Should Know
In today’s digital economy, New Jersey businesses of all sizes rely heavily on technology vendors, software providers, cloud platforms, and managed IT services. Whether your company is purchasing software, migrating data to the cloud, engaging a cybersecurity consultant, or entering into a long-term managed services agreement, a careful IT contract review can have significant operational, […]
Non-disclosure agreements (NDAs) remain a critical tool for protecting sensitive business information. However, New York NDA requirements have evolved, and businesses must ensure these agreements are carefully drafted to remain enforceable. In a competitive market like New York City, NDAs are commonly used to protect proprietary information, client relationships, and strategic plans. At the same […]
How Courts Evaluate Testamentary Capacity and Undue Influence Will contests in New Jersey are difficult to win, given the strong presumption that a properly executed will reflects the testator’s intent. However, challenges based on lack of testamentary capacity and undue influence remain common, particularly where there are concerns about mental capacity or the involvement of […]
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Sign up to get the latest from our attorneys!
Explore What Matters Most to You.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.
Let`s get in touch!
Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!
