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ESMA considers blockchain update to regulatory reporting guidance

Out-Law News | 11 Jan 2022 | 3:07 pm | 1 min. read

The European Securities and Markets Authority (ESMA), the EU’s securities markets regulator, has issued a call for evidence on distributed ledger technology (DLT).

ESMA is seeking input from affected organisations on the use of DLT for trading and settlement, and on the need for amending the regulatory technical standards (RTS) on regulatory reporting and transparency requirements.

A DLT is a database of replicated, shared, and synchronized digital data spread across multiple locations or institutions with no central administrator. One DLT, called blockchain, is commonly used by cryptocurrencies.

The regulator wants to assess whether the RTS developed under the Markets in Financial Instruments Regulations, covering certain transparency and data reporting requirements, need to be amended in order to be effectively applied to securities issued, traded and recorded on DLT.

It comes after the European parliament and the European council reached a political agreement on a DLT pilot in November last year, though the pilot’s text has not been finalised. Officials said it was important to consult stakeholders at this early stage since the pilot is likely to start applying in the beginning of 2023.

They said the aim was to ensure more efficient, secure, and cost-effective management of the data stored on DLTs while preserving its quality, usability and comparability.

The areas covered in the call for evidence include equity transparency (RTS 1), non-equity transparency (RTS 2), double volume cap and provision of data (RTS 3) and data reporting requirements (RTS 22-25).

The ESMA also wants stakeholder feedback on the transaction reporting exemption, and effective ways the regulator might access to information on transactions, financial instruments’ reference data and transparency data.

Respondents are invited to provide comments by 4 March 2022, before the ESMA considers amendments to the RTS. If they amendments are necessary, the regulator will consult on its proposal before submitting the final draft RTS to the European Commission for adoption.

The DLT pilot is expected to begin in early 2023.