On 22 June 2023, the European Securities and Markets Authority (ESMA) published a speech delivered by Verena Ross, ESMA Chair, at the ISLA 30th annual securities finance and collateral management conference on building safe digital financial markets: a collective effort.

In her speech, Ms Ross addresses the following:

Current market conditions

  • Technological innovation is changing the way financial products are being designed, distributed and consumed, and are facilitating retail participation in financial markets but are also creating new risks.
  • ESMA acknowledges that the development of Distributed Ledger Technology (DLT) and its various financial applications can open opportunities for the EU financial sector. DLT infrastructures and tokenisation may facilitate the improvement of back-end processes by reducing reliance on manual tasks, optimising asset use and ensuring more efficient settlement processes, among other use cases.
  • The finalisation of the Digital Finance Package represents a very positive step in terms of creating an adequate regulatory and supervisory framework in the EU for the use of these new technologies.


  • In order to make the task more manageable for all concerned parties, including market participants, ESMA has established a phased consultation plan which foresees the sequential publication of three consultation packages: one in early July; one in October; and a third early next year.
  • Creating a safe and inclusive financial marketplace is not the sole prerogative of regulators, it should be regarded as a collective effort. ESMA therefore welcomes industry-led initiatives to facilitate the efficient and prudent adoption of new technologies through, for example, the development of harmonised standards and the promotion of coordinated practices within the industry.
  • ESMA is approaching the implementation of MiCA not only through the development of legal obligations and implementing measures, but also through the lens of cooperation.
  • MiCA will apply to activities that were previously unregulated, therefore it is necessary to anticipate initiatives promoting the establishment of convergent supervisory practices at the national level to ensure a level playing field across the EU single market.

DLT Pilot

  • The DLT Pilot facilitates the set-up of new types of market infrastructures, such as a DLT multilateral trading facility, a DLT settlement system and a combined DLT trading and settlement system.
  • ESMA has issued, and will continue to issue, guidance on several aspects of the DLT Pilot Regime and will be able to give opinions on national authorisations.
  • In the absence of central bank digital currencies, a significant challenge but also an opportunity provided by the DLT Pilot Regime is the possibility to use innovative solutions for cash settlement that do not involve traditional cash.
  • ESMA stands ready to support the development process in a collaborative and inclusive way by working closely with both Member State competent authorities and market participants that are willing to take part in the DLT Pilot.
  • In the medium-to-long-term, the lessons learned may result in changes to the main sectoral legislation in the EU, such as MiFID II and CSDR.


  • Next year, ESMA intends to publish a report on settlement efficiency in the EU, including the impact of cash penalties and a comparison between CSD settlement and settlement internalised at the level of custodians.
  • ESMA believes that an important part of the work to improve settlement efficiency is to identify and address the root causes of settlement fails, by looking at the entire custody and settlement chain.
  • According to the ongoing negotiations on the CSDR review, ESMA may get a mandate to elaborate a report covering i) an overview of international developments on settlement cycles and their impact on capital markets in the EU; ii) an assessment of the costs and benefits of shortening the settlement cycle in the EU, differentiating where appropriate, between types of financial instruments; and iii) a detailed assessment and timeline of how to move to a shorter settlement cycle, differentiating, where appropriate, between different financial instruments.
  • ESMA has started first discussions with Member State competent authorities as well as with industry, which have highlighted the importance of continuing to monitor international developments on T+1 and understanding the impact on EU market players.