DTCC Connection

Apr 19, 2016 • DTCC Connection

Exploring Blockchain’s Impact on Policy and Risk Management

By Theresa Pagliocca

From left to right: Mark Wetjen, Charles Cascarilla, Adrienne Harris, Dan Morehead and Nick Ogurtsov

What will be blockchain’s potential impact on global public policy goals and how can the technology assist in risk management? These two questions took center stage during a panel discussion on the implications of the technology for regulators and risk managers at DTCC’s Blockchain Symposium.

Mark Wetjen, DTCC Managing Director and Head of Global Public Policy kicked off the discussion by noting that the post-trade landscape is a heavily regulated area with rules and regulations that reflect policy decisions made over decades. These policies are aimed at protecting investors and customers of financial firms, mitigating systemic risk, preventing manipulation and fraud in financial markets and facilitating supervision of markets through transparency.

“We should assume that these goals will likely remain in place for some amount of time, and it’ll be interesting to see how distributed ledger technology will affect the realization of those goals,” Wetjen said.

The panel focused on three main topics: 1) the impact of distributed ledger technology (DLT) on policy goals in relationship to specific use cases; 2) the posture of regulators regarding use of DLT; and 3) improvements to risk management through use of this technology.

Impact on Policy Goals

Adrienne Harris, Special Assistant to the President for Economic Policy, National Economic Council, The White House, stressed that innovation and regulation are not mutually exclusive. In discussing the impact of blockchain on long-standing policy goals, she said, “Consumer protection, investor protection, market protection and transparency are all things we seek to further in our work at the National Economic Council, throughout the administration and through the independent regulators as well. I don’t think technology will change the goals. But our hope is there will be technologies that will help further those goals.”

The question of potential conflicts regarding the use of decentralized technology in the centralized clearing of a marketplace was also discussed. Nick Ogurtsov, Chief Operating Officer and Chief Risk Officer of KCG Holdings, said, “I don’t actually think central clearing is necessarily an opposite of a blockchain approach. At the end of the day, blockchain could be that paradigm changing solution where the world is completely different, or it could be a technology that enhances certain existing processes without completely turning them on their head.”


  • Mark Wetjen, DTCC Managing Director and Head of Global Public Policy (moderator)
  • Adrienne Harris, Special Assistant to the President for Economic Policy, National Economic Council, The White House
  • Dan Morehead, CEO, Pantera Capital and Chairman, Bitstamp
  • Nick Ogurtsov, Chief Operating Officer and Chief Risk Officer at KCG Holdings, Inc.
  • Charles Cascarilla, Chief Executive Officer, itBit

Regulatory Engagement

The panel discussed how regulators approach the use of DLT and the challenges inherent in the process to obtain regulatory approval. During the discussion, Dan Morehead, CEO, Pantera Capital and Chairman, Bitstamp, highlighted the utility of DLT to help regulators have greater transparency into marketplaces. “Regulators are realizing that a permanent paper trail of every transaction that’s ever happened is an amazing thing for government. It’s great for law enforcement. It’s great for fiscal tax collection,” he said.

Charles Cascarilla, Chief Executive Officer, itBit, provided insight into the regulatory licensing process and explained that obtaining approval to use DLT provides both capabilities and responsibilities. He said, “We hold regulatory capital, regulatory exams, regulatory filings, just more or less like a bank.”

Cascarilla compared regulatory approval to an “external Good Housekeeping seal of approval” that provides the ability to interact in the financial system.

Improvements to Risk Management

The ability to strengthen a firm’s risk management through use of blockchain technology was a prevalent theme among the panelists. Ogurtsov highlighted the technology’s benefits in terms of tracking and sharing operational and cyber security risk. That would also apply for helping investors to better judge counterparty risk, which could be improved with information that is aggregated and available in real time.

He explained, “Smart contracts can let you build risk management properties directly into the transactions themselves, which, right now, you enforce via a court of law. But down the road that might actually be built in directly to the contracts themselves, such as moving margin around…”

Morehead added that transparency is the critical benefit of blockchain technology to a firm’s risk management effort. He said, “…it is the transparency that reduces risk dramatically compared to traditional securities markets.”