On Thursday, The European Union (EU) regulators released a guideline to apply to run a financial market based on distributed ledger technology (DLT). The recent move is seen as a clearance to the new pilot regime scheduled to start in March.
Sources reveal that the lawmakers that are a part of the organization acknowledge the technology associated with cryptocurrencies. The lawmakers are also aware of the potential it holds to facilitate the removal of mediators when trading financial instruments like stocks, bonds, and other securities.
However, there have also been concerns about whether regular retail investors could access the optimum benefits in practice as they would also need to take a test first.
As per the official guidance released, the users of a platform, when they are regular people and not investment firms, must report their experience to the concerned agency. The statement read:
“When users of the platform are regular people, rather than, say, an investment bank, the applicant should clearly indicate to the [national competent authority] for its assessment what are the experiences (e.g., through its education, training, professional experience, etc.) which demonstrate a sufficient level of knowledge of the functioning of the DLT technology.”
There have been concerns about challenges to using DLT against the existing ways of accessing financial markets, especially in a case where each country does it differently.
This guidance from the European Securities and Markets Authority (ESMA) isn’t mandated, but national authorities must issue an explanation for not adhering to it.
The ESMA has encouraged the members to take this action seriously. Its notice read:
“Though they take effect in March, alongside the rest of the rule changes, applicants are strongly encouraged to anticipate the formal entry into force of the guidelines.”
According to the sources, the new regime is open to existing markets and new entrants. The ESMA said that the feedback and comments on the draft were received from companies like investment firms, trading venues, and securities depositories.