A vision for regulated digital security infrastructure in Europe

Abstract

Over recent years, the benefits and use of cases for adopting distributed ledger technology (DLT) in securities markets have been outlined by numerous public and private authorities, including the European Securities and Markets Authority,22 the European Central Bank,3 the Bank for International Settlements,4 the US Federal Reserve5 and the Committee on Payments and Market Infrastructures (CPMI).6 Furthermore, the European Commission has adopted a policy of promoting the uptake of DLT and encouraged exploration of its use across the financial sector, including the securities market.7 Cited benefits include: (i) trust (based on the reduced risk of the data being manipulated); (ii) a single but shared version of the ‘truth’; (iii) a reliable means of sharing control of transactions and data; (iv) automation through smart contracts; and (v) the ability to represent, hold and transfer value without the risk of duplication.8 In the securities market, this could mean, amongst other things: (i) more efficient post-trade processes, reducing the time-to-market; (ii) enhanced reporting and oversight; and (iii) reduced costs, for example.9