European Securities and Markets Authority explores blockchain's impact on mainstream finance

The European Securities and Markets Authority (ESMA) held a conference on financial innovation in Paris on December 16, with blockchain and distributed ledger technology being the main topics of discussion.

According to meeting details released by ESMA, attendees discussed blockchain’s potential impact on mainstream financial services. ESMA initially called for information on the technology in April 2015.

During his opening remarks, Jean-Paul Servais of the Belgian Financial Services and Markets Authority touched on this topic, noting that as more financial institutions consider using this technology, they should be aware that there are risks as well as opportunities.

He said:

“While there may be opportunities when these institutions don’t understand the technology well and generally operate outside of the norm, there are clearly risks as well.”

Later, Adrian Blundell-Wignall, a special adviser to the intergovernmental economic bloc, the Organization for Economic Cooperation and Development (OECD) , commented that from his perspective, the risk of digital currencies being used by terrorist financiers makes stricter regulations necessary, but not at the expense of innovation.

     “Terrorist financing, money laundering and illicit transactions are all reasons why we need to regulate this area closely. However, we need to be careful not to stifle technological innovation in this area.”

One panel during the conference specifically focused on the issue of decentralized ledgers, asking; “Do they really disrupt the existing transaction lifecycle?”

Participants included Alex Batlin , head of labs at UBS , Blythe Masters , CEO of Digital Asset Holdings , Peter Randall , COO of Setl , Wiebe Ruttenberg , senior adviser at the European Central Bank (ECB) , and John Schindler, head of macroeconomic analysis at the U.S. Federal Reserve .

In her closing remarks, ESMA’s Executive Director Verena Ross touched on some of the implications of the symposium:

“Based on our discussions, we believe this technology could be very useful in improving the efficiency of after-sales services, reducing costs, and increasing the security and transparency of the financial system. However, to achieve this goal, many challenges need to be addressed, including issues related to personal privacy and governance rights. The transition to a new system could be complex and resource intensive.”

“As regulators , we should start preparing for these upcoming changes, ” Ross said.