The US agency has used a no-action letter to enable a sandbox-like approach to blockchain-based trade settlements.
In what may be the first regulator-approved application of blockchain technology for the settlement of US equities trades, the Division of Trading and Markets of the US Securities and Exchange Commission (SEC) recently granted no-action relief to Paxos Trust Company (Paxos) to conduct a two-year “feasibility study” of a securities settlement service using distributed ledger technology. During this period, Paxos will be permitted to operate as a clearing agency under Section 3(a)(23) of the Securities Exchange Act without needing to register as a clearing agency under Section 17A(b)(1) of the Act. The no-action relief for the Paxos Settlement Service (PSS) is limited to clearing a volume-restricted number of trades per day of highly liquid publicly traded equities, for at most seven eligible broker-dealers. Continue Reading