Blockchain smart contracts raise systemic risk concerns

Automated swaps margin payments could exacerbate systemic risks, regulators warn

blockchain concept
Regulators are concerned that self-executing technology could emphasise herd behaviour in a crisis

Regulators have raised concerns about the use of blockchain technology to automate the exchange of margin on derivatives transactions.

Distributed ledger technology (DLT) has been touted as a replacement for existing margin and collateral processes in the derivatives industry, which has struggled to cope with new rules on margining non-cleared trades. 

But regulators say smart contracts – software developed for DLT systems that can automate post-trade lifecycle events, such as margin calls – c