For those who are acquainted with the topical world of blockchain and distributed ledger technologies (‘DLTs’), it should be clear that the technologies’ scope and potential extends far beyond cryptocurrencies. Indeed, DLTs can be applied to an infinite number of disparate industries and the implementation thereof could serve to significantly streamline conventional processes by redesigning the way in which they are carried out.  In this article, the technologies’ application for identity digitisation and the stock exchange will be explored.

Digital identity has become a fundamental tool of the internet era. Individuals are able to interact with other users on a global scale, in both business and social interactions. All information is stored in unconnected centralised servers which, if compromised, could result in the data being lost, damaged or manipulated.  Additionally, there is no guarantee that a person’s online profile is truly reflective of who that person actually is.

In the ‘offline world’, verification is perhaps easier to attain by comparing the person with his identity documents. This assurance is, ironically, facilitated by the fact that in order for the person to have obtained that document, he must have obtained it from a centralised institution, such as the passport office. But what if there were a way for digital identities to be validated? Doubts on the integrity of digital identity would be dispelled.

This could be achieved via blockchain technology, in which a ‘hash’ is produced when data is inputted therein. If the information behind the hash is altered, a different hash is produced and this output could not be approved by the other participants in the network, thereby resulting in the data inputted being controlled and the prevention of forged data being entered. What is as yet unclear is where liability would lie in the unlikely case that forged data were to be accepted onto the ledger.

Another major potential application of DLTs is their implementation within a capital market context. For example, in a utopian DLT environment, a Blockchain trading platform could match tradeable securities to a willing investor, facilitating the grant or transfer of ownership while contemporaneously updating the registry on which details of holders of the securities are maintained. This would serve to reduce administrative costs, possibly replacing the need for intermediaries.

However, if this were to be achieved, current laws would need to be updated to reflect the fact that investors and issuers would be in direct contact with one another, and certain processes which by law are conducted by centralised institutions, must be revised.

This, among other themes, will be discussed at Camilleri Preziosi Advocates’ Capital Markets Conference, which will be held on December 6 from 2pm to 6pm at the Marina Hotel Corinthia Beach Resort, St Julian’s.

capitalmkts@camilleripreziosi.com