State Street’s Justin McCormack (Senior Vice President and Senior Managing Counsel) has published thoughts on potential future regulation for digital assets in a piece, entitled ‘Paving Regulatory Pathways for Digital Assets’.
McCormack notes that the diversity of different types of digital assets makes a one size fits all approach unworkable, while a patchwork of different jurisdiction regimes isn’t ideal either.
Citing complexities in the third-party custody of digital assets, such as securities tokens under current legal frameworks, McCormack suggests that one possible approach would be to rely on distributed ledger technology (DLT)-empowered central securities depository (CSD) to issue and own such digital assets without the need for a central market authority.
This could either be done on a permissioned or permissionless basis with the latter approach requiring legal reforms to achieve legal certainty that the CSD as tokenizing entity has proper title to the assets and is not creating new risks.
Acknowledging that DLT can theoretically allow for peer-to-peer exchange and instant settlement, State Street’s McCormack notes that achieving DLT’s potential “. . . may require a move away from a fully centralized governance structure, but it remains unclear whether regulators are willing to do that and if they are, what the caveats might be.”
Read more about State Street’s thought leadership on digital assets here.