The International Swaps and Derivatives Association (ISDA) and Linklaters earlier this month released a whitepaper titled “Smart Contracts and Distributed Ledger – A Legal Perspective.”
The paper sets out what smart contracts and distributed ledger technology (DLT) are, how they can be used in the context of derivatives, and the related legal considerations. It says that while smart contracts have great potential to be used for derivative products and ISDA documentation, the technology is still nascent.
In addition, the paper also lists technologies that would be complementary to DLT and smart contracts s that could enhance use of the ISDA documentation. These includes E-Signing and Modularisation.
The paper calls for industry wide standards to ensure smart contracts are interoperable across firms and platforms. To that end, it said that ISDA is working to develop these standards. ISDA said that it has set up working groups to coordinate the various legal/documentation, regulatory, technological and reporting workstreams in order to future-proof standard documentation and align data standards.
“Now is a crucial time in the development of smart legal contracts. If there are to be smart legal contract standards and technologies that can viably be used for derivatives products, it is important that ISDA and the global derivatives industry play a key role in the development of these standards and work closely with utilities and service providers in their development of the applicable technologies”, it said.
ISDA also plans to hold further roundtable meetings going forward to ensure coordination across various workstreams.
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