Blockchain Securities Trading Doesn’t Need More Rule Changes, EU Agency Says

Incumbents and newcomers are lining up to take part in a distributed ledger pilot from March, ESMA said

AccessTimeIconSep 27, 2022 at 3:39 p.m. UTC
Updated May 11, 2023 at 3:47 p.m. UTC

Securities trading using distributed ledger technology (DLT) doesn’t require further changes to market transparency law, the European Securities and Markets Authority said in a report Tuesday – but the agency did concede its guidance will need to adapt to the Web3 era.

The European Union (EU) recently agreed to new laws to enable innovative ways to trade stocks and bonds using the blockchain, by easing requirements to use brokers and use a separate securities depositary – and the trial is set to start in March 2023.

Today the European Securities and Markets Authority said there was no need for changes to the subsidiary regulations it’s responsible for as a result of that trial – but also revealed high market interest in trying out the new rules.

“A significant number of market participants expressed interest in operating a DLT MI [market infrastructure] under the DLT Pilot,” the report said. ESMA cited interest from trading floors and settlement infrastructure, both new players and incumbents, from inside and outside the bloc.

Proponents say the new systems, allowing trading of tokenized securities could prove more transparent and efficient, helping cut out the middleman from financial-market trading – but getting the highly regulated sector to adapt might not be straightforward.

“ESMA will not amend existing requirements on post-trade transparency and could provide further guidance,” the regulator said, promising new guidelines “either before the application of the DLT Pilot, or based on first experiences of the Pilot, as appropriate.”

Existing subsidiary EU laws, known as regulatory technical standards, set out exactly how and when the details of stock and bond trades need to be published to help shine a light on what financial markets are up to.

But respondents have complained the rules need tweaking, since traditional finance norms don’t always work in crypto land. While trade in stocks, say, would need to be reported within one minute, validating a bitcoin transaction can take as much as one hour, they note.


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Jack Schickler

Jack Schickler was a CoinDesk reporter focused on crypto regulations, based in Brussels, Belgium. He doesn’t own any crypto.