The European Securities and Markets Authority (ESMA) has come to the conclusion after a 1.5 year of monitoring and analysing the situation around blockchain in Europe.
In the new report on the application of the distributed ledger technology, the European securities authority states that at the current stage of its development, any regulatory actions would be superfluous.
“First, … many feel that DLT applications are unlikely to raise major regulatory issues in the short-to-medium term. Second, many are concerned that regulations should remain ‘neutral’ vis-à-vis the technology used by market participants to fulfil their obligations. Also regulation should provide for a level playing and any adaptations to the existing regulatory framework would need to be considered in a broader context than just DLT. Finally, a number of respondents fear that premature regulation could undermine DLT’s potential.”
In the report, ESMA assessed the advantages the European financial sector may gain from blockchain adoption.
“DLT could bring a number of benefits to financial markets, including more efficient post-trade services, enhanced reporting capabilities and reduced costs.”
According to the experts, it is still difficult to fully assess the changes that DLT may bring to the market since the technology is still at an early stage of development and its “practical applications are limited both in number and scope.”
In 2015, ESMA for the first time called for public comments on the possible legal framework for blockchain technologies in the financial sector. Later in 2016, ESMA published a discussion paper for public consultation seeking feedback on the application of DLT to securities markets. In it, the securities watchdog mentioned a number of legal and technical challenges posed by blockchain, such as scalability and legal issues.