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Executive Summary
The United States has the deepest and most liquid capital markets in the world, facilitating growth and innovation across all industry sectors. Throughout the years, U.S. capital markets have continued to innovate as technology has allowed for profound evolutions in market infrastructure, changing at times the very nature of American financial markets. Over the last few years, Distributed Ledger Technology (“DLT”) has rapidly gained interest in the securities industry, including SIFMA and many of its members.
As observers have noted, interest in DLT involves the potential benefit it could bring to the capital market ecosystem and infrastructure. Some benefits that have been described include capital savings through reduced or instantaneous settlement, streamlining of recordkeeping and data reconciliation, and the programmability of a securities asset itself; among many others. DLT has been explored by regulated financial institutions and market infrastructure providers through various pilots and production platforms, researched by regulators, and leveraged by certain market participants exploring innovative ideas around improving transfer of value and development of new types of finance. Financial market participants in particular have started to take an increasing interest in the use of DLT to issue securities and effect securities transactions. This is evidenced by global regulatory authorities issuing licenses to entities servicing digital securities1; a few approved Regulation A+ security token offerings (“STOs”); a public company seeking to issue a completely digital dividend that evolved into a courtesy copy being available through a digital format; a proposed trading facility for the listing and trading of a new type of tokenized equity security; and even the first ever effectiveness of a public offering of securities native on DLT in the U.S.
In response to these efforts and the industry’s desire to help support innovation, we have prepared this Discussion Paper…