In a recent paper, the International Securities Lending Association (ISLA) considers potential areas of focus that cover the relatively low uptake of distributed ledger technology (DLT) offerings, potential milestones to watch for and, in relation to securities financing markets, impacts from wider market adoption, particularly in areas such as primary issuance and collateralization.
The emergence of DLT and blockchain technology, poses both opportunities and challenges to traditional financial markets. But while some envisaged disintermediation and democratization of the financial ecosystem within a short space of time, a revised or alternative financial system has not spontaneously emerged.
In the paper, ISLA discusses: current and potential use cases; the need for trust and confidence in financial markets; the co-existence model; tradfi and defi; the need for oversight; legal certainty, settlement finality and enforceability; maintaining the integrity of issued securities.
Adrian Dale, head of Regulation & Markets at ISLA, said in a statement: “While we are not yet witnessing the wholesale transformation of financial market infrastructure, there remains a strong sentiment that we are at a critical inflection point. At ISLA we believe it is our responsibility to assist in market evolution and facilitate that smooth transition to new technologies, and part of the process is having open dialogue with the industry, regulators and innovators to drive adoption that is measured, cohesive, and collaborative in nature.”