ESMA recognizes the huge role of blockchain in the financial sector

维蕾娜•罗斯, executive director of the European Securities and Markets Authority (ESMA), the EU's top securities regulator, said ESMA believes blockchain technology can improve back-end trading processing systems.

ESMA has spent more than a year investigating the impact of digital currencies, including Bitcoin, on the EU investment environment. In April last year, ESMA asked major financial institutions for detailed information on digital currency technology to assess how it affects the securities trading cycle.

Verena Ross spoke at an event organized by the Bank of England and London Business School earlier this month, in which she said that while investigations are still ongoing, ESMA has recognized that distributed ledger technology can be widely used in the post-trade space. Ross's remarks reiterated the views she expressed at ESMA's Financial Innovation Conference in Paris in January.

Ross said:

After investigation, we found that this technology can have the greatest impact in the following four areas: clearing and settlement, collateral management, title records, and securities services. It achieves this by providing a single reference database, instant reconciliation, immutable shared records, and transparent real-time data for all participants.

However, Ross said ESMA also sees some risks in these possible applications, especially in the areas of scalability and security, as well as interoperability with the financial system.

At one point, we have confidence in the ability of distributed ledger technology to handle large volumes of transactions, manage privacy issues, and ensure a high level of security. In addition, we expect that as distributed ledger technology is deployed, it will still need to prove its ability to interact with certain systems that must continue to coexist with distributed ledger technology, such as trading platforms.

Furthermore, Ross noted that the adoption of the technology “could raise issues of fair competition if a monopolistic environment emerges,” adding that ESMA also believes that private blockchain systems could lead to a loss of transparency for regulators.

“While the technology is intended to increase transparency, we believe the use of complex encryption could hinder transparency and regulation.”

However, Ross continued, “If this technology can successfully overcome these obstacles, we can envision significant benefits to us all – lower costs, reduced risk of cybercrime, and improved overall market efficiency.”

Ross concluded:

“ESMA will continue to investigate distributed ledger technology to determine whether there is a need for regulatory regulation of its deployment in financial markets.”

Original article: http://www.coindesk.com/esma-director-blockchain-could-enhance-securities-post-trade-processing/
By Stan Higgins
Translator: printemps
Editor: printemps
Source (translation): Babbitt Information (http://www.8btc.com/verena-ross-blockchain)