Despite the distributed ledger technology (DLT) system being designed to establish a ‘trustless’ environment, unsuccessful governance could increase vulnerability in markets.
The Financial Industry Regualtory Authority (FINRA) has published a report on the implications of blockchain and claims a network of this nature could present risks to markets and investors.
“Many market participants are seeking to use private DLT networks with a governance structure that takes into account that participants in the network are generally known and trusted parties,” the report said.
A key principle of blockchain is that no single party is responsible for, or empowered with, governing and operating the network.
FINRA recognised this could offer certain advantages - such as providing a decentralised system not dependent on any specific party to operate –but mismanagement could see severe consequences.
The regulatory authority is seeking comment on the issue of blockchain governance and is asking market participants whether multiple firms or a single entity should shape its governance.
The report also asked for comment on who would be responsible for the day-to-day operations of the network and how conflicts of interest should be addressed.
2017 has been poised as the ‘year of blockchain experimentation’, with calls for banks to work together and leverage the technology expected to remain a key theme.
A recent survey, however, found blockchain implementation across businesses is being hindered by a lack of available talent.
A poll of 200 senior level professionals - carried out by Synechron and TABB Group - found almost 40% of firms do not currently have enough talent capable of bringing blockchain to the business.