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Regulating Financial Innovation: DLT Potential and Promise for Financial Market Infrastructures (FMIs)

The current worldwide banking and financial markets regulation updates are widely seen as an important milestone in the evolution of global financial stability and market confidence in a move forward to re-establish full global banking and efficient financial market functioning. Technology plays a unique role in this regulatory transformation becoming more and more observed in various spheres of increasingly digitized financial markets. It is seen more and more in everyday banking, central bank settlements, clearing and settlement of assets, trade of derivatives and many other fields. A persistent theme of this paper is the currently changing approaches to regulation of technological risks following a rapid transition to the wholesale level leveraging and mass-adoption of technologies on financial markets. Following an introduction to emerging technologies on the financial market, this paper looks at various factors behind currently changing regulatory paradigm, as well as blockchain’s structure and promise for Financial Market Infrastructures (FMIs), including new and alternative settlement models which become available on DLT.