Fed weighs in on blockchain technology

Federal Reserve publishes paper on distributed ledger technology.

The US Federal Reserve has said in a recently published paper that the industry’s understanding and application of blockchain technology is still in its infancy.

The paper explained given the technology’s early stage, a number of challenges to the development and adoption of blockchain remain.

It listed issues around business cases, technology hurdles, legal and risk management aspects and explored potential use cases for blockchain.

The Federal Reserve explained the use cases in payments, clearing and settlement of securities could “address operational and financial frictions around existing services.” 

The central bank said blockchain technology has the potential to drive change in market structure, although added it is too early to predict what these changes could be.

“As the technologies and experimentation with these technologies continue to develop, it will be important to thoroughly understand how these changes apply broadly,” the paper said.

It concluded: “Understanding the potential range of distribution ledger technology (DLT) adoption and its link to changing the financial market structure is an area for future research.”