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European regulators are not aligned with their global counterparts and could be holding back the potential of blockchain technology with their misunderstandings and misconceptions, says Joshua Satten, director, FinTech Practice, Sapient Global Markets.
Joshua Satten, director, FinTech Practice, Sapient Global Markets
There’ s a distinct lack of detail or examination of the current proof-of-concepts and a real lack of nuance around what is still a fairly nascent, yet comprehensive, technology. Perhaps we shouldn’ t be surprised. ESMA has a lot on its plate right now with Mi- FID I. So where, with its limited resources, it would find the time to thoroughly research DLT, let alone assess its market implications is questionable. Odder still, is how ESMA seems to have completely ignored a research report issued this past year by the UK Government Office for Science, penned by the UK Government’ s chief scientific adviser, praising the technologies’ potential and recommending real-life adoption. Most notably, when compared to the opinions coming from other regulators like the US Commodity Futures Trading Commission( CFTC) or the Monetary Authority of Singapore( MAS), ESMA feels out of step with its contemporaries globally. The issues described throughout come across odd considering that markets globally are looking towards technology
37. [] This could drive some firms out of the market and lead to a monopoly-like situation with negative consequences on the cost and quality of the services. Joshua’ s take: In respect to the former, wasn’ t this both a driver leading to and resulting from the European Market Infrastructure Regulation( EMIR)? For the latter … recent LIBOR scandal anyone?
The conclusions ESMA draws from this cognitive path, specifically that it is too early to regulate, are illogical assertions to begin with. Is it feasible, let alone desirable, for ESMA to‘ regulate’ any technology or how it’ s used, beyond the auspices of insider trading, market fixing, or investor protection? It’ s no wonder ES- MA’ s other recent paper around technical standards and guidelines for financial organisations is vague throughout, thus spurring on technical risk, the same risk it is meant to prescribe mitigation towards and monitor.
“ By reining in current activity within a regulatory framework you run the risk of stifling market fairness and limiting innovation adoption.”
to remedy where man can’ t or won’ t help himself. Some excerpted examples:
Operational risks
36. [] However, ESMA believes that DLT might facilitate the dissemination of errors, unless a number of checks are implemented. Joshua’ s take: Risk to fair competition and orderly markets.
There is a danger we must all keep in mind; by reining in current activity within a regulatory framework you run the risk of stifling market fairness and limiting innovation adoption. This could theoretically force our markets into ending up as weaker, sub-standard versions of their existing infrastructures, forcibly maintaining rapidly more arcane processes on old technology stacks while other
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