20 November 2017
visit www.solutions.lexisnexis.com

Distributed ledger technology could damage financial market integration - ECB

26 September 2016  |  9946 views  |  0 Numbers

A senior executive at the European Central Bank has spoken out about the potential damage to financial market integration from the haphazard uptake of distributed ledger technologies by the Bloc's banks.

Speaking at the annual Sibos event in Geneva, Yves Mersch, a member of the executive board of the ECB, acknowledged the potential of distributed ledgers to fundamentally change securities and payments business.

However, as a technology that is still in its infancy, Mersch says there are substantial functional, operational, governance and legal aspects which need to be carefully looked at before thinking about possible mass adoption.

"Hence, the Eurosystem cannot, at this stage, consider using DLT in the market infrastructure," he says.

While the central bank remains open to exploring whether its possible future use could bring benefits, Mersch cautions against private sector initiatives.

"A multitude of different DLT approaches and models could jeopardise financial market integration by increasing fragmentation," he says. "Undue periods of market consolidation and standardization could hamper the smooth functioning of a Single Payments Area. We could be in a situation similar to the one that lead to the establishment of the pan-European T2S settlement platform."

The ECB has moved to address the dangers by setting up a DLT Task Force under the T2S Governance. Its main objective is to assess the potential impact of DLT on T2S as well as on the wider post-trade harmonisation agenda. The work of the task force will be complete by the end of 2017, says Mersch.

In other key focus areas, the ECB is pushing ahead with programmes to support the consolidation of the Target2 real-time gross settlement system with T2S, provide settlement services for instant payments, and deliver a Europe-wide colletral management system.

"These strategic reflections have entered into the next phase," says Mersch. "Last week, the Eurosystem decided to launch the investigation phase into these three components. The aim is to ascertain whether there is a business case for each, to agree with the users on the scope of services and to prepare a cost-benefit analysis."

On instant payments, he says that the Bank is investigating the necessity of extending settlement operating hours to allow for real-time settlement, supported by the delivery of an enhanced Target2 functionality for the Bloc's automated clearing houses. A decision will be forthcoming by Q1 2017, he says, so as not to delay the go live of a number of domestic market initiatives.

Comments: (0)

Comment on this story (membership required)

Finextra news in your inbox

For Finextra's free daily newsletter, breaking news flashes and weekly jobs board: sign up now

Related stories

ECB investigates use of distributed ledger but warns of far-reaching consequences

ECB investigates use of distributed ledger but warns of far-reaching consequences

26 April 2016  |  13020 views  |  0 comments | 16 tweets | 23 linkedin
Swift role in Target2 up for grabs; ECB ponders blockchain prospects

Swift role in Target2 up for grabs; ECB ponders blockchain prospects

16 February 2016  |  13204 views  |  0 comments | 10 tweets | 15 linkedin
ECB eyes up European P2P payments

ECB eyes up European P2P payments

02 February 2016  |  13855 views  |  6 comments | 30 tweets | 41 linkedin
ECB goes back to drawing board to draft new T2S timetable

ECB goes back to drawing board to draft new T2S timetable

18 December 2015  |  7337 views  |  0 comments | 7 tweets | 10 linkedin
ECB posits combination of Target2 and T2S on single platform

ECB posits combination of Target2 and T2S on single platform

14 October 2015  |  8466 views  |  1 comments | 9 tweets | 8 linkedin
ECB plays down virtual currency risks

ECB plays down virtual currency risks

03 March 2015  |  8842 views  |  0 comments | 15 tweets | 13 linkedin
Immediate payments 'next frontier' for European integration - ECB

Immediate payments 'next frontier' for European integration - ECB

09 December 2014  |  19804 views  |  2 comments | 23 tweets | 37 linkedin
ECB fingers systemically important payment systems for oversight

ECB fingers systemically important payment systems for oversight

21 August 2014  |  10842 views  |  0 comments | 8 tweets | 10 linkedin

Related company news

 

Related blogs

Create a blog about this story (membership required)
visit www.vasco.comvisit www.aciworldwide.comvisit www.atos.net

Top topics

Most viewed Most shared
Ripple boss predicts central bank adoption of blockchainRipple boss predicts central bank adoption...
18451 views comments | 28 tweets | 31 linkedin
Singapore central bank open sources blockchain prototypesSingapore central bank open sources blockc...
12734 views comments | 16 tweets | 29 linkedin
AmEx partners Ripple and Santander for blockchain-enabled cross-border paymentsAmEx partners Ripple and Santander for blo...
11304 views comments | 15 tweets | 41 linkedin
UK cryptocurrency exchange startup launches debit card for spending bitcoinUK cryptocurrency exchange startup launche...
9126 views comments | 26 tweets | 37 linkedin
Barclays warns of unprecedented online fraud this ChristmasBarclays warns of unprecedented online fra...
8519 views comments | 15 tweets | 31 linkedin

Featured job

Competitive
New York, NY - USA (some flexibility on location)

Find your next job