The European Association of Co-operative Banks (EACB) welcomes the opportunity to contribute to the Discussion Paper on the Distributed Ledger Technology Applied to Securities Markets.
EACB members are exploring the benefits of DLT in different areas such as international payments, global transactional banking (mainly cash management / cash pooling and supply chain finance) and also capital markets using smart contracting for derivatives and redesigning cash products. They also find that DLT could offer added value in authentication, credentials, AML/KYC, compliance. Taking a more “infrastructure” perspective, the EACB members are interested in projects like cash on ledger for micropayments, settlement coins to get rid of cryptocurrency usage in different DLT and smart payments applied to payrolls etc. Having said that, the world of technology is evolving very quickly and DLT is but one technology among others that could perhaps fulfil the functions under consideration.
The EACB supports ESMA view as outlined in item 2.1.3 of the Discussion Paper that the version of DLT to be used in the financial (securities) markets is the permissioned-based DLT system. The EACB sees the post trading part of financial markets as an area where application of DLT technology – at least in the short to medium term - could create the most important benefits. It therefore subscribes to the ESMA approach to analyse, in this discussion paper, the role of DTL versus the different post trading functions.
In general, the EACB is of the opinion that – regulators, technology providers and financial intermediaries have to be closely aligned in order to achieve a smooth transition to DLT based processes in the future. It is our vested interest to support and keep the regulatory safeguards updated and in parallel create the supervisory and legal framework and supplementing conditions that all market participants are in a position to benefit from the DLT.
We would also like to emphasise that the DLT is not limited to selected securities markets like the EU markets only. DLT has in fact to be seen in a global context. Therefore ESMA should also consider close alignment with regulators of non-EU jurisdictions and global standard setters for regulation, i.e. CPMI-IOSCO.
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