European regulator seeks input as to how blockchain can enter the mainstream

The European Securities and Markets Authority (ESMA) has launched a call for evidence on investments using virtual currency or distributed ledger technology.

ESMA is seeking information and views from stakeholders on new developments in how virtual currency technology is used to issue, buy and sell and record ownership of securities. ESMA would like to hear from all those involved: whether from existing financial institutions, new start-ups or their technological advisers, and issuers and investors.

ESMA is interested in how different virtual currencies and the associated blockchain, or distributed ledger, can be used in investments.

There are now facilities available to use the blockchain infrastructure as a means of issuing, transacting in and transferring ownership of securities in a way that bypasses the traditional infrastructure for public offer and issuance of securities, trading venues like exchanges and central securities depositaries or other typical means of recording ownership.

The pan-European regulator is intending to find out more about these market developments and in particular to know to what extent the use of the blockchain could enter the financial mainstream, and how it could be used.

All contributions should be submitted online under the heading Your input – Consultations on ESMA’s website. The consultation will be open until 21 July 2015.

ESMA has been monitoring and analysing virtual currency investment over the last 6 months, to understand developments in the market, potential benefits or risks for investors, market integrity or financial stability, and to support the functioning of the EU single market.

ESMA’s analysis is set out in this paper. ESMA is seeking to share its analysis in order to promote wider understanding of innovative market developments, and invites market participants and other stakeholders to submit feedback and any additional information on key topics which include virtual currency investment products, i.e. collective investment schemes or derivatives such as options and CFDs that have virtual currencies (VCs) as an underlying or invest in VC related businesses and infrastructure, as well as virtual currency based assets/securities and asset transfers, i.e. financial assets such as shares, funds, etc. that are exclusively traded using virtual currency distributed ledgers (also known as block chains), and lastly, the application of the distributed ledger technology to securities/investments, whether inside or outside a virtual currency environment.

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