Susan Yin: A Transdisciplinary Enquiry into Governance of DLT Applications in Financial Services

Dr Susan Yin is a teaching fellow in Financial Law at King's College London Dickson Poon School of Law. Prior to joining King's, Susan worked at the World Bank and Bank Policy Institute in Washington DC as research fellow on regulatory policy matters. Susan is also Fellow at the Institute of International Economic Law of Georgetown University Law Centre and a Cutler Fellow of the Salzburg Global Seminar.

The development of distributed ledger technologies has the potential to disrupt legacy payment and settlement systems. Blockchain-based transactions supported by smart contracts could overtake centralised payment and settlement services, and, crypto-currencies and assets serve as alternatives to cash and securities. Moreover, from its naissance, Satoshi Nakamoto had intended blockchain to provide for a new form of governance system, to engender greater levels of democracy and participation through decentralised organizations that operated via networks of nodes without any centralised intervention. In the last couple of years, regulatory activities in the DLT space have increased in tandem with a burgeoning of DLT research and development, resulting, in many cases, in the application of traditional regulatory principles and rules to DLT-based assets and applications.

This paper contends that the top-down approach in regulation is inherently paradoxical to the concept of decentralisation that forms the fulcrum of blockchain. Therefore, it is argued that national regulators should reconceptualise the principles of regulation in their attempt to address the risks arising from DLT.

In this paper, the questions of what is DLT governance, what are the issues of concern in governance, what is required for a good governance framework will be examined. Through a translational process of drawing insights from both IT and social sciences literature, and, reviewing the governance practices in developing DLT securities trade settlement systems, the paper seeks to lay down a soft-law framework to enhance the governance of DLT in financial services.