EU Securities Watchdog: Too Early to Predict DLT Impact

It’s too early to predict the full regulatory impact of distributed ledger technology (DLT), a representative of Europe's securities watchdog argued this week.

Patrick Armstrong, a senior risk analysis officer for the European Securities and Markets Authority (ESMA), made the comments during a speech at a securities industry event in Oslo on 23rd January.

In his remarks, Armstrong touched upon a number of the factors changing securities trading in Europe, including distributed ledgers.

Notably, he indicated it is not yet possible to say which regulations might need to change due to the growing adoption of the tech, saying:

"We believe it is premature to appreciate all the technological changes and the potential regulatory response that may be needed, as the technology is still in its infancy."

The agency has spent much of the past year and a half investigating DLT for its potential impact on the EU's securities market.

It released a new discussion paper in June, and its officials have spoken on the subject in the past, suggesting that, pending further adoption, the industry's landscape could be altered significantly. ESMA first began soliciting feedback from stakeholders in mid-2015.

In his speech, Armstrong further suggested that regulations outside the finance space may also be impacted by DLT, thereby affecting adoption of the tech as it may occur in the months and years ahead.

"[A] number of concepts or principles, eg, the legal certainty attached to DLT records or settlement finality, may require clarification as DLT develops," Armstrong noted. "Also, ESMA realizes that beyond pure financial regulation broader legal issues, such as contract law, insolvency law or competition law, may impact on the deployment of DLT."

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