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:
What to Do If You Are Impacted by a Retailer Bankruptcy Part 2
Over the past year, brick-and-mortar stores have closed their doors at a record pace. Fluctuating consumer preferences, the rise of online shopping platforms, and ongoing economic uncertainty continue to put pressure on the retail industry. When a retailer seeks bankruptcy protection, a myriad of other businesses are often impacted. Whether you are a supplier, customer, […]
The Current Administration's Proposals for the Financial Services and Banking Industries Will Affect Your Business
Since his inauguration two months ago, Donald Trump’s administration and the Congress it controls have indicated important upcoming policy changes. These changes will impact financial services policies and priorities. The changes will particularly affect cryptocurrency, as well as banking rules and regulations. Key Regulatory Changes in Cryptocurrency For example, in the burgeoning cryptocurrency business environment, […]
Tips for Commercial Landlords Impacted by Wave of Retailer Bankruptcies Part 1
The retail sector has experienced a wave of bankruptcy filings over the last year. Brick-and-mortar businesses in financial distress include big-name brands like Big Lots, Party City, The Container Store, and Vitamin Shoppe. When large retailers seek bankruptcy protection, they are not the only businesses impacted. Landlords can be particularly hard hit. While commercial landlords […]
How Understanding Bankruptcy Trends Can Benefit Your Business
The bankruptcy legal landscape presents both challenges and opportunities for businesses navigating financial distress. Understanding current bankruptcy trends can help businesses make more informed and strategic decisions. Corporate Bankruptcy Filings Trending Upwards Bankruptcy filings continued to trend upwards in 2024. According to statistics released by the Administrative Office of the U.S. Courts, personal and business […]
SEC Takes Actions Against Issuers for Failure to File Form D
In December, the U.S. Securities and Exchange Commission (SEC) announced charges against two privately held companies for failing to file a Form D notice, which is generally utilized for exempt securities offerings. Here, the SEC’s enforcement sends a strong message: compliance with regulatory requirements is not optional and failure to comply can have significant consequences. […]
Redefining Labor Relations: NLRB's Pivot from Abruzzo’s Memoranda
On February 14, 2025, the Office of General Counsel (OGC) of the National Labor Relations Board (NLRB) under Acting General Counsel William B. Cowen issued Memorandum 25-05, “New Process for More Efficient, Effective, Accessible and Transparent Case handling.” The Memorandum rescinds nearly all of the Memoranda issued by his direct predecessor, Jennifer Abruzzo, setting the […]
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!
