About a-team Marketing Services
The knowledge platform for the financial technology industry
The knowledge platform for the financial technology industry

A-Team Insight Blogs

ESMA States its Case on Distributed Ledger Technology

Subscribe to our newsletter

The European Securities and Markets Authority (ESMA) has stepped into industry discussion on the pros and cons of distributed ledger – or blockchain – technology (DLT) and concluded that regulatory action is premature at this stage, but may not be in the longer term.

The authority issued a report this week, The Distributed Ledger Technology Applied to Securities Markets, that is based on responses to a discussion paper issued in June 2016 and sets out ESMA’s views on DLT, its potential applications, benefits, risks and how it maps to existing EU regulation.

The report anticipates that early applications of DLT will focus on optimising processes under the current market structure, particularly less automated processes in low volume market segments. Longer term, and based on industry responses to the discussion paper, it notes the potential of the technology to support clearing and settlement activities.

Possible benefits of DLT in securities markets include more efficient post-trade processes, enhanced reporting and supervisory functions, greater security and availability, and reduced counterparty risk and enhanced collateral management, all of which should lead to cost reductions for financial service providers and their users.

The challenges of DLT discussed in the report include the need for a critical mass of market participants in a segment to adopt the technology, interoperability, governance and privacy issues, and scaling. Potential risks outlined in the report include cyber attacks, fraudulent activity, operational risk if errors are disseminated, fair competition issues, and market volatility.

Taking a stance on regulation and DLT, the report concludes: “ESMA’s understanding is that the current EU regulatory framework does not represent an obstacle to the emergence of DLT in the short term. Meanwhile, some existing requirements may become less relevant through time. New requirements might on the contrary be needed to address emerging risks. Also, a number of concepts or principles, for example the legal certainty attached to DLT records or settlement finality, may require clarification as DLT develops.”

Subscribe to our newsletter

Related content

WEBINAR

Upcoming Webinar: Strategies, tools and techniques to extract value from unstructured data

Date: 12 September 2024 Time: 10:00am ET / 3:00pm London / 4:00pm CET Duration: 50 minutes Unstructured data is voluminous, unwieldy and difficult to store and manage. For capital markets participants, it is also key to generating business insight, making better-informed decisions and delivering both internal and external value. Solving this dichotomy can be a...

BLOG

NICE Actimize ARCHIVE-X Offers Single Source Regulatory Record Keeping

NICE Actimize has released ARCHIVE-X, a cloud-based, all communications archiving and records management solution that provides buy-side, sell-side and online trading platforms with one solution to support regulatory requirements for communications archiving and records management. The aim is to help financial institutions achieve more robust records lifecycle management and reduce compliance risk by archiving all...

EVENT

Data Management Summit New York City

Now in its 14th year the Data Management Summit NYC brings together the North American data management community to explore how data strategy is evolving to drive business outcomes and speed to market in changing times.

GUIDE

Regulatory Data Handbook – Fourth Edition

Need to know all the essentials about the regulations impacting data management? Welcome to the Fourth edition of our A-Team Regulatory Data Handbook which provides all the essentials about regulations impacting data management. A-Team’s series of Regulatory Data Handbooks are a great way to see at-a-glance: All the regulations that are impacting data management today A...