On 7 February 2017, European Securities and Markets Authority (ESMA) published a report stating that regulatory action for blockchain technology is “p
On 7 February 2017, European Securities and Markets Authority (ESMA) published a report stating that regulatory action for blockchain technology is “premature”, as cryptocoinnews.com wrote.
“At this stage, ESMA believes that it is premature to fully appreciate the changes that the technology could bring and the regulatory response that may be needed, given that the technology is still evolving and practical applications are limited both in number and scope. In the responses to our DP, ESMA has not identified major impediments in the EU regulatory framework that would prevent the emergence of DLT in the short term. Meanwhile, a number of concepts or principles, e.g., the legal certainty attached to DLT records or settlement finality, may require clarification.”, according to the report, page 3.
The ESMA, Europe`s chief securities watchdog and regulator, started researching the topic back in the early 2013. At that time, bitcoin, the most well-known application of blockchain technology, gained mainstream popularity as a payment method.
Blockchain technology may bring a number of benefits such as reduced costs, but it can also create challenges, as ESMA stated in their report.
“These challenges include interoperability and the use of common standards, access to central bank money, governance and privacy issues and scalability.”, explained the ESMA in the report, page 2.
However, the watchdog concludes that blockchain technology does not pose a threat to central financial market infrastructures, as cryptocoinnews.com reported.
“Importantly, ESMA sees as unlikely for DLT to eliminate the need for financial market infrastructures, such as Central Counterparties (‘CCPs’) and Central Securities Depositories (‘CSDs’).”, reads on the ESMA`s report, page 2.
At a recent conference named “Blockchain Technology: The Future for Financial Services”, senior risk analysis officer at the ESMA, Patrick Armstrong, spoke about three different approaches to address the challenges of blockchain technology, as cryptocoinnews.com wrote.
Armstrong mentions three possible solutions: an outright ban on blockchain technology, a “wait and see” approach that has been taken at the moment and a regulatory approach that is now considered by governments, reported cryptocoinnews.com.