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Distributed ledger

Distributed ledger technology and its regulatory implications

Blockchain technology, also called distributed ledger technology (DLT), facilitates a number of innovations in the financial services sector. A distributed ledger is a public, decentralised account book originally developed as the technological foundation of the virtual currency bitcoin. In digital payment and business transactions, DLT can be used to record transactions between users without the need for a mandatory central authority to legitimise individual transactions.

The financial sector quickly realised the large number of possible applications and DLT’s potential to increase efficiency. A number of initiatives are currently exploring and specifying blockchain’s broad scope of application.

Deutsche Börse has been making substantial investments in the development and introduction of state-of-the-art services using DLT. Among Deutsche Börse’s most recent activities in this area are the development of a blockchain solution for cross-border securities transfer in cooperation with the Liquidity Alliance as well as the development of a functioning prototype for the blockchain-based settlement of securities transactions in cooperation with Deutsche Bundesbank, Germany’s central bank. In addition, Deutsche Börse is a premium member of the Linux Foundation’s Hyperledger project.

A number of challenges but “too early for regulatory measures regarding blockchain”

In a recent study, the European Securities and Markets Authority (ESMA) indicated that blockchain bears the potential of bringing a number of benefits to the financial market, such as efficient post-trading processes, improved reporting and data management as well as cost reductions.

Regulators have, however, also pointed to the fact that there are a “number of challenges” to be dealt with and that, in spite of the many promising tests thus far conducted, blockchain is still at a very early stage at which it is still “unclear whether the technology will be able to meet all of these challenges”. Supporters and developers of the new technology must adhere to existing regulation.

The European Central Bank (ECB) emphasises: “The new technologies will have a profound effect on the financial markets. It is essential to examine, analyse and test them to ensure that future market infrastructures are not only efficient and innovative, but also safe and reliable.”

Distributed ledger: the highlighted parts of the value chain are affected

BIS publishes report on distributed ledger technology

The report provides an analytical framework for central banks and other authorities to review and analyse the use of distributed ledger technology (blockchain) for payment, clearing and settlement. Market participants and other interested parties may also find this report useful.

ESMA report on distributed ledger technology

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The ESMA report assesses the potential of distributed ledger technology and how it may interact with EU rules.

IOSCO analyses tech-driven change in the securities market industry

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The new IOSCO report highlights the increasingly important intersection between financial technology (fintech) and securities market regulation, and describes the impact it has on investors and financial services.

Risk-free cash transfer with blockchain

Trading infrastructure

We have developed a concept for riskless transfer of commercial bank money based on distributed ledger technology (blockchain). By combining blockchain technology with its proven post-trade infrastructure, Deutsche Börse aims to achieve efficiencies.

Four CSDs develop blockchain prototype with Deutsche Börse

Cooperation

The aim is to launch an initiative leveraging blockchain technology to ease cross-border mobilisation of security collateral.

Joint blockchain project with Deutsche Bundesbank

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Deutsche Bundesbank and Deutsche Börse jointly presented a functional blockchain-based prototype as the first result of a collaborative research project.

Additional Information

Contact

Group Regulatory Strategy

+49-(0) 69-2 11-1 39 80

+49-(0) 69-2 11-1 39 81

regulatory.strategy@​deutsche-​boerse.com