The European Securities and Markets Authority (ESMA) has said distributed ledger technology (DLT) could render some processes in the trade lifecycle redundant.
A report on blockchain explained ESMA understands DLT could also change the role of certain market participants over time, leading to certain regulatory requirements becoming less relevant.
ESMA also stated that despite the apparent benefits of distributed ledger technology (DLT), market participants are still expected to comply with regulation.
The EU watchdog said regulators face a ‘balancing act’, as they work to understand the risks that new products or processes formed from blockchain could introduce.
ESMA added it remains responsible for supervising the rules of conduct by which financial institutions operate with the aim of minimising disruption to markets.
“The existence of DLT does not free market participants from complying with the existing regulatory framework, which provides important safeguards for the well-functioning of financial markets,” ESMA said.
The report concluded the EU regulator intends to revisit the regulatory framework on a regular basis “to ensure it remains effective and relevant.”