The European Securities Market Authority (ESMA) has suggested legal issues that stretch beyond those contained in financial regulation could affect the deployment of blockchain technology.
A recent discussion paper explained ESMA does not see the current EU regulatory framework obstructing the use of blockchain in the short term, but the legal certainty attached to settlement require further clarification.
However, ESMA added: “At this stage, it is premature to fully assess the changes that the technology could bring and the regulatory response that may be needed.”
ESMA recently said blockchain technology has not reached a point where regulatory action is needed, so has taken a ‘wait and see’ approach towards it.
Speaking at the Oslo Børs ASA stock exchange and securities conference last month, senior risk analysis officer, Patrick Armstrong, explained the approach should not be considered as passive, but instead “one in which we actively try to learn more about the innovation.”
“By waiting to see how the innovation develops we do not risk stifling a potentially socially or economically useful product or process,” he said.
ESMA’s report predicted the first areas of use of blockchain technology could be less automated processes in low volume market segments and processes.
It said: “ESMA expects the early applications of blockchain to focus on optimising processes using the current market structure.”
The report concluded ESMA will continue to monitor market developments around blockchain to assess whether a regulatory response is needed.