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Browsing by Author "Byggmästar, Robert"

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  • Byggmästar, Robert (2019)
    Distributed ledger technology is one of the latest fintech innovations that could increase the efficiency of securities markets. The technology represents a new paradigm how the need of trusted third parties can be eliminated and how transaction cost can be lowered. The technology can be used as a platform for so-called smart contracts. The implementation of DLT and smart contracts is however not risk free, the technology is also at an early stage and it is still unsure whether it will overcome all hurdles. Before the innovations can be utilized on a full scale, potential risk such as the uncertainty regarding the legal validity and enforcement of smart contracts needs to be eliminated, so that the technology can be implemented and used with a high level of predictability and trust. The research sets out to solve the research question from the view point of Finnish securities law, limiting the research to smart contracts in securities markets. General principles are deconstructed using international, European and Finnish sources to solve the legal problem. Smart contracts can be divided into blockchain smart contracts in crypto markets and smart contracts in securities markets, the research focuses on the latter. Smart contracts can also be divided into smart contract code and smart legal contracts. Smart contracts are defined in the research as agreements automatable by computer and enforceable by either legal enforcement of rights and obligations or by execution of code. Technology neutrality is set out as a central principle in regulating fintech. The research question is reframed as whether a contract concluded in code is valid and enforceable. By analysing electronic contracts, enforcement of code, the example of the vending machine and by teleologically interpreting the law, it is established that smart contracts concluded in code can be both legally valid and enforceable. Validity and enforceability from the perspective of securities law can also be seen as the execution of rights and the issuance of securities. Securities and securities markets also have special characteristics, such as being fungible, collective and anonymous. Securities markets are also already to a high degree automated, using electronic trading systems, where many securities exist only in electronic form, programming languages are also already used to express securities and their functions. Existing securities law, which is technology neutral, can therefore be applied on smart contracts in securities markets, without the need of any regulatory changes. The growing digitalisation and automation of securities markets raise however broader questions such as the elasticity of the law and its implications on the stability of the financial system.