Permissionless Networks Clear Regulatory Hurdles for Financial Institutions
Financial institutions are increasingly leveraging permissionless blockchain networks to record share information and issue tokenized products, but some still believe these networks are incompatible with financial compliance laws.
Innovation leader Franklin Templeton began using permissionless blockchain in 2021 for its U.S. government money market fund, while BlackRock will start issuing tokenized shares on Ethereum in March 2024.
However, many institutions mistakenly think that only permissioned networks meet regulatory requirements, citing the Bank Secrecy Act and sanctions laws.
A recent paper from Jito Labs argues that financial institutions can indeed use permissionless networks to build products and conduct transactions while fulfilling their obligations under existing laws.
The authors point out that regulators have acknowledged that financial institutions can adjust their compliance systems based on technological innovation, including permissionlessness.