Blockchain-based New Financial Infrastructures Theory, Practice and Regulation

This book focuses on development of blockchain-based new-generation financial infrastructures, in which a systematic, complete theoretical framework is proposed to explore blockchain-based securities trading platform, central securities depository (CSD), securities settlement system (SSS), central counterparty (CCP), payment system (PS) and trade repository (TR). The blockchain-based new FMI has attracted much attention in the securities industry. At present, the cross-border depository receipt (DR) business faces a dilemma between efficiency and security. In this book, the author proposes a blockchain-based new DR solution, manifesting the potential for using blockchain technology in the FMI field. In addition, using Hashed Timelock Contract (HTLC) as the underlying technology in the DR scenario, specific process and operations are proposed for delivery versus payment (DvP), delivery versus delivery (DvD) or payment versus payment (PvP) and other exchange-of-value methods. This book further studies how to carry out opening positions, end-of-day settlement of margin, forced liquidation and settlement at maturity, for exchange-traded derivatives, such as futures and options, under the blockchain-based technological framework. Blockchain technology not only naturally fits into the decentralized or non-centralized characteristic of the OTC market but also can effectively address the pain points and difficulties of the OTC market. This book provides an in-depth analysis of existing specific issues in China’s bond market, regional equity markets and asset management market, among other OTC markets, and proposes relevant blockchain-based solutions. Blockchain technology does not change the public policy objectives for FMI. The

blockchain-based new FMIs are still subject to compliance, safety and efficiency requirements. This book provides a comprehensive assessment of the applicability of the Principles for Financial Market

Infrastructures (PFMI) to them, in particular, analyzes their legal basis, off-chain governance and system security.

Envisaged Framework and Key Considerations, Name.- Blockchain-based Cross-border FMIs: In the Scenario of Depository Receipts.- Blockchain-based Exchange-traded Derivatives FMIs: In the Scenarios of Futures and Options.- Blockchain-based Over-the-Counter FMIs.- Blockchain-based OTC Derivatives FMI.

Dr. YAO Qian is Director-General of the Technology Supervision Bureau of the China Securities Regulatory Commission (CSRC). He used to serve as Chief Executive Officer of China Securities Depository and Clearing Corporation Limited (CSDC), Director-General of the Institute of Digital Money of the People’s Bank of China (PBoC), Deputy Director-General of the Technology Department of PBoC, and Deputy Director-General of PBoC Credit Reference Center. He is a senior engineer and a Ph.D. supervisor. He has published around 200 papers and 10 books and holds more than 100 patents. Dr. YAO was awarded first prize for his outstanding contribution in promoting new technology development and application in the financial sector of China, such as digital RMB experimental project. He was also awarded “Coindesk’ most influential in blockchain 2017.”