European Central Bank Reaffirms Its Support For Blockchain Technology

European Central Bank Reaffirms Its Support For Blockchain Technology

The European Central Bank (ECB) reaffirmed the need to support the development of blockchain technologies, as stated in its Capital Markets Union mid-

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The European Central Bank (ECB) reaffirmed the need to support the development of blockchain technologies, as stated in its Capital Markets Union mid-term review.

The bank explained that the Eurosytem, in which it participates, has a task to support efficient payment and settlement systems. Therefore, the blockchain technology may be one of the solutions that can enable faster, safer and less costly transactions.

The Eurosystem is formed by the ECB and the central banks of all member states who has adopted the Euro as their state currency.

As the review made clear, the blockchain technology has attracted interest from both the financial industry and the public authorities. However, it was made a point that the adaptation of distributed ledger technologies (DLTs) could require changing the current legal framework.

The regulation that is to be developed should be long lasting, as the review explained. The banks should interact with developers to make sure that regulations are not overlooked.

Need for DLT?

The ECB has said in a report that it is looking into innovative solutions like blockchain or distributed ledger technology, as cryptocoinnews.com reported earlier.

“The emergence of new technologies such as “blockchain” or “distributed ledger technologies” is currently giving rise to many talks, studies and publications and a number of actors in the industry are already evaluating the impact that such innovations may have on the provision of financial services. As part of its vision, the Eurosystem intends to assess their relevance for the different services it provides to the banking communities (payments, securities settlement as well as collateral). This investigation will identify opportunities that these new technologies may provide, as well as the challenges that they create.”, as the report noted on page 6 (available at: https://www.ecb.europa.eu/paym/t2/shared/pdf/professionals/RTGS_services_consultative_report.pdf?7a30e88d06a34a4dd8d25fcb47712b5a).

A project called Target2-Securities was implemented in June 2015 as a single settlement platform across Eurosystem. However, it has its issues since the timetable used by the platform isn`t on track after significant technical concerns.

If DLT is fully realized, the technology could possibly facilitate instant settlement of trades in an efficient and cheaper way, as it is speculated.

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