European regulators launch ledger tech consultation

ESMA investigation will look at the rise of blockchain technology and how it might need to be regulated as it takes securities markets by storm.

The European Securities and Markets Authority (ESMA) has launched a consultation on the use of distributed ledger technology (DLT), as its use in the financial markets looks set to surge.

The consultation is aimed at gaining wider knowledge on the potential benefits and risks associated with DLT in the securities market as well as how it will be impacted by regulations.

In the accompanying discussion paper, ESMA has identified the European Market Infrastructure Regulation (EMIR) and the Central Securities Depository Regulation (CSDR) as being key regulations applicable to DLT.

ESMA will consider all comments submitted by 2 September.

This is the second ESMA consultation in as many days following the launch of its consultation on participant default rules under CSDR.

DLT has been hailed by custodians as being the future of the industry with potential to streamline processes such as settlement, clearing and corporate actions.

It has been the source of much publicity in recent months.

Earlier this week State Street announced that only 7% of asset owners and managers surveyed currently employ DLT initiatives despite 57% believing that it will be widely adopted over the next five years.

In April, SWIFT has also suggested that DLT in its current state cannot fulfil the requirements of the financial industry.