Blockchain Securities, Insolvency Law and the Sandbox Approach

Abstract

Blockchain is a new technology that is based on an algorithm which allows participants of an IT network to process, store and share data across multiple points without the need for any intermediary, at least in order to ensure the integrity of the data dealt with. This technology is simplifying financial markets—many organizations are launching initial coin offerings to facilitate the financing of new business ventures; moreover, ‘securities’ that are issued in such a digital form can be bought and sold in the secondary market without the intervention of the traditional intermediaries. However, this use of blockchain could give rise to many problems which, in this article, will be analysed from the prospective of insolvency law. This paper will argue: first, that these problems originate from the fact that the issuance of blockchain securities is creating a divide between the world where securities are issued, offered and sold, and the world where law is enforceable; secondly, that these problems cannot be managed easily because of the lack of an apt point of attack, rather than because of the claim that the principle of technological neutrality should be observed; thirdly, that—under certain conditions—the sandbox approach that is being adopted by the UK financial conduct authority could contribute to directly shaping the platforms in pursuit of regulatory goals.