Bringing blockchain into securities markets, Feb. 12–19

Every Friday, Law Decoded delivers analysis on the week’s critical stories in the realms of policy, regulation and law.

Editor’s note

Technology is by and large not the major barrier — though many in the industry have a decent bit of hubris about it. More important is that people, whenever their money is on the line, get mighty conservative. Which is not necessarily greedy or unreasonable, but it is why it was easier for lawmakers to greenlight email than electronic signatures.

Conservatism surrounding money also means that old systems have to fail in a pretty conspicuous fashion for anyone to seriously talk about reforming or even discarding them. Think about how grotesque the subprime mortgage bubble of 2008 looked as regulators and news outlets dug through its wreckage in subsequent years: That’s what it took for Dodd-Frank to pass into law.

The whole Robinhood turbulence at the end of last month is not in the same league. But any casual observer, uncontaminated by the MBA jargon that exists to justify such shenanigans, can look at the events surrounding GME trading and know that these markets are not as free as we might imagine. And maybe it’s for that reason that we’ve spent so much time talking about it, because it’s an intro to standing problems in securities trading that is interesting enough to teach a whole generation of casual observers what short-selling is.

The thing is, the stock market is not going anywhere. But everyone sees in this eye-catching crisis an occasion to petition for what they want. For the blockchain community, it’s been an opportunity to consider how you can disintermediate securities trading or even facilitate same-day settlement of trades — securities tokens in other words. Others have, however, used it as an opportunity to disown classic securities altogether. But, more low-profile than the Robinhood affair, this week has seen a number of developments that bring crypto into securities markets and securities markets onto blockchains.