ESMA Shares Findings of DLT Pilot with EU Policy Makers
The European Securities and Markets Authority (ESMA) has reached out to EU policy making bodies to provide an update on the progress of its distributed ledger technology (DLT) pilot. In a letter addressed to the European Commission, Parliament, and Council, ESMA shared the findings of the first year of the pilot project.
According to ESMA, four official applications have been submitted under the DLT Pilot Regime, with eight more potential applications expected in 2024. Despite the slow uptake, ESMA sees the pilot regime as an opportunity to explore innovative solutions for cash settlement and clarify regulatory expectations related to custody provision in the context of DLT market infrastructures.
One of the key challenges identified by ESMA is the lack of central bank digital currencies, which complicates cash settlement processes. The Authority also highlighted the need for clarity on the roles and responsibilities of entities involved in DLT market infrastructures and called for further examination of interoperability between DLT-based and traditional market infrastructures.
ESMA has requested the European Commission to consider extending the pilot regime beyond its current three-year timeline, which ends in 2026. This extension, ESMA believes, would provide market participants with sufficient time to implement and operate their projects effectively.
Overall, ESMA’s letter underscores the importance of addressing regulatory challenges and investor protection issues in the evolving landscape of DLT technology. By engaging with EU policy makers, ESMA aims to foster a conducive environment for the development and adoption of DLT solutions in the financial market.