The European Securities and Markets Authority (ESMA) is calling for input from stakeholders on the use of distributed ledger technology (DLT) for trading and settlement.
The request is part of ESMA’s DLT Pilot Regime which intends to test the development of the European infrastructure for trading, clearing and settlement of DLT-based financial instruments.
Crypto-as
sets are one of the main DLT applications for finance while. distributed ledger, broadly defined, is a consensually shared database through which a transaction is validated.
The European Commission proposed the DLT regulation in September 2020, together with markets in crypto-assets (MiCA), digital operational resilience (DORA) and a complementing amending directive.
This digital finance package is seen as bridging a gap in existing EU legislation, to ensure it does not pose obstacles to the use of new financial instruments.
The Commission said the package supports innovation and uptake of new financial technologies while providing for an appropriate level of consumer and investor protection.
The DLT Pilot regime, which should apply from early next year, requires ESMA to assess whether the regulatory technical standards developed under MiFIR relative to certain pre-and post-trade transparency and data reporting requirements need to be amended in order to be effectively applied to securities issued, traded and recorded on DLT.
ESMA will also examine transaction reporting exemptions and ways in which regulators can gain access to information on transactions, financial instruments’ reference data and transparency data.
The European watchdog said, “The aim is to ensure more efficient, secure, and cost-effective management of the data stored on DLTs while preserving its quality, usability and comparability.”
Stakeholders are invited to provide comments by 4 March 2022. If the feedback deems amendments are necessary, ESMA will consult on its proposal before submitting the final draft RTS to the Commission for adoption.
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