The UK Financial Conduct Authority (FCA) has published feedback on its discussion paper on distributed ledger technology (DLT).

Earlier this year, the regulator sought stakeholder views on the potential for future development of DLT in the markets it regulates. It has received 47 responses from a wide range of market participants including regulated firms, national and international trade associations, technology providers, law firms, and consultancies.

In their feedback, respondents expressed their support for the FCA’s ‘technology-neutral’ approach to regulation and welcomed its Sandbox and RegTech initiatives. They also believe that existing FCA rules are flexible enough to accommodate the use of DLT by regulated firms. Many respondents suggested that DLT solutions could deliver regulatory requirements more efficiently than current systems, substantially reducing costs for firms and regulators alike.

However, some respondents have raised concerns about the compatibility of permissionless networks with the FCA’s regulatory regime. The FCA said it is open to all forms of deployment of DLT (including both permissioned and permissionless networks) provided the operational risks are properly identified and mitigated.

The FCA said it will continue to closely watch DLT-related market developments, and accordingly keep its rules and guidance under review.

"The original paper opened a discussion about DLT and the volume and breadth of responses we received from the industry demonstrates the significance of this issue. DLT has the potential to transform practices across a number of markets, sharpening competition and improving risk management. At the same time we have to be alive to the risks of certain applications of it. We will continue to work with a range of agencies and firms to ensure a co-ordinated approach to the use of DLT in financial services,” Christopher Woolard, Executive Director of Strategy and Competition at the FCA, said.

On the Initial Coin Offering (ICO) market, the FCA said it will gather further evidence and conduct a deeper examination to determine whether or not there is need for further regulatory action in this area. In September, it issued a warning against ICOs saying that they are “high-risk, speculative investments” and urged investors to be aware of the risks involved before investing.