We recognize the potential of distributed ledger technology, or blockchain, to transform the way financial market participants transfer, store, and maintain ownership records of digitized assets. The genuinely innovative aspect of distributed ledger technology combines a number of core elements that can be used to support the transfer process and distributed recordkeeping for digital assets and digital representations of assets. These elements include peer-to-peer networking and distributed data records, which provide broadly shared access to a single ledger across participants in the system, so that all participants maintain a shared, accurate history of all transactions in the system. In addition, cryptography provides a secure way to initiate a valid transaction as well as to securely transmit and store data. And consensus algorithms provide a process for transactions to be confirmed and added to the single ledger, which is an important feature when more than one participant has permission to propose updates to the ledger. We are paying close attention to distributed ledger technology, or blockchain, recognizing this may represent the most significant development in many years in payments, clearing, and settlement.1
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