ECSDA approves inclusion of digital assets to existing regulatory frameworks

The association for Europe's CSDs believe existing post-trade regulatory frameworks would be well-suited to include crypto-assets. 

By Joe Parsons

An organisation representing the likes of Clearstream, Euroclear and SIX, has said it is in favour of incorporating digital assets into current regulatory frameworks which it believes will help inject trust into the crypto market.

In response to the European Commission’s consultation on digital assets, the European Central Securities Depository Association (ECSDA) stated current legislation such as the CSD Regulation (CSDR), the Financial Collateral Directive (FCD) and the Settlement Finality Directive (SFD) would also be fit for digital tokens to comply to.

“Current EU legislation (like CSDR, SFD and FCD) is technology-neutral and fit for purpose for investment tokens,” ECSDA said in its response.

“Incorporating crypto-assets not falling under the current regulation into the existing financial regulatory framework, where appropriate, will inject trust and legal certainty, enable their quick adoption, address financial stability, consumer protection and market integrity needs.”

By incorporating digital assets into existing regulatory frameworks, the post-trade body argued this would the avoid the need of CSD’s to create multiple legal entities to service digital assets, and therefore avoid market and regulatory fragmentation.

In a separate consultation response, the European Association of Clearing Houses (EACH), whose members include ICE, LCH and Deutsche Boerse, argued clear and distinct categorisation of digital assets between security, payment, utility and hybrid-assets are of critical importance.

It also highlighted the necessity of a gradual regulatory approach in the areas of trading, post-trading and asset management concerning security tokens.

Growing investor interest in digital assets has fuelled demand for crypto-custody solutions, but very few banks are currently willing to take on the risk. This has largely been due to a number of regulatory and market structure factors.

The EU’s public consultation on a framework for markets in crypto-assets seeks to gain industry feedback on definitions and classifications of cryptocurrencies and other security tokens.

In November last year, the International Securities Services Association (ISSA) published its own guidance for digital assets, where it stated developing standards and interoperability are among the two top priorities for post-trade providers to expand their services to the nascent asset class.