ESMA is seeking feedback from stakeholders on the possible use of DLT in securities markets, its potential benefits and the risks that such broader use may pose.

The European Securities and Markets Authority (ESMA) has published a discussion paper on the potential benefits of distributed ledger technology (DLT) for the securities markets. The paper also addresses the potential risks of DLT and includes a review of the key EU regulations that would be applicable to DLT, including the European Market Infrastructure Regulation (EMIR), the Securities Finality Directive (SFD) and the Central Securities Depositories Regulation (CSDR).

The paper analyses the potential benefits of DLT such as higher security, greater efficiency in clearing and settlement and reduced costs. It also mentions some of the legal and technical challenges that would need to be overcome before DLT could be applied widely to securities markets. ESMA states: “Some of these challenges are related to the technology itself such as the scalability of the technology and the interoperability with existing systems. Other challenges are mainly related to the governance framework, privacy and regulatory issues.”