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Esma assesses regulatory framework for distributed ledger adoption

02 June 2016  |  6523 views  |  0 Risk on chalkboard

The European Securities and Markets Authority (Esma) is seeking feedback from market participants on the possible use of distributed ledger technology in securities markets, honing in on the "potential benefits and the risks that such broader use may pose".

The EU financial stability group has issued a discussion paper for public consultation on the issues surrounding the uptake of DLT across market infrastructures. The paper provides a stock-take, with a particular focus on post-trading activities, of the key EU regulations which would be applicable to DLT, including the European Market Infrastructure Regulation (Emir), the Securities Finality Directive (SFD), and the Central Securities Depositories Regulation (CSDR).

Esma stresses that firms willing to use DLT "should be mindful of the existing regulatory framework".

The regulator says the consultation will help it to "assess the opportunities and challenges posed by DLT from a regulatory standpoint and form an opinion on whether a specific regulatory response to the use of this technology in securities markets is needed".

While acknowledging the potential benefits of DLT, the paper strikes a cautious note, highlighting a number of legal and technical challenges that would need to be overcome before DLT could be applied widely to securities markets.

"Some of these challenges are related to the technology itself such as the scalability of the technology and the interoperability with existing systems," says the agency. "Other challenges are mainly related to the governance framework, privacy and regulatory issues."

Read the full paper:» Download the document now 573.9 kb (PDF File)

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