On 6 August 2021, the European Securities and Markets Authority (ESMA) published a report on the use of FinTech by central securities depositories (CSDs).
The report focuses on the use of FinTech by CSDs. ESMA has gathered the views of Member State competent authorities (NCAs) and relevant market players on the existing experience with the use of FinTech and in particular distributed ledger technology (DLT), their plans to use this type of technology in the coming future and whether the current regulatory framework represents a barrier for them to implement their projects involving DLT.
In the report ESMA concludes that the Central Securities Depositories Regulation (CSDR) is intended to be technology-neutral and, as such, should be able to accommodate the use of new technologies. Some aspects would benefit from additional clarifications and ESMA considers that most of these could be dealt with through Q&As.
ESMA has also put forward some recommendations to the European Commission mainly in respect of:
- Issues related to securities accounts, credits, debits, segregation requirements and reconciliation requirements.
- Operational requirements.
- Settlement of securities and of cash in a DLT environment.
- Settlement finalty.
The Commission is expected to prepare a legislative proposal by the end of 2021.