The conference on application of new Technologies in capital market infrastructures which took place on 27 November 2018 in Brussels was organised by the European Central Securities Depositories Association ECSDA. Members of CDCP top management participated in the conference. Speakers in in the conference were representatives of the European Commission, the European Central Bank, market participants – central depositories and international associations (operating in sector of securities).
View of the European Commission on blockchain presented Roberto Viola, Managing Director of DG Connect. The European Commission established several expert groups focused on artificial intelligence and blockchain technology. Concerning latter the Commission gathers case studies on blockchain technologies that could be put in utilised in public services sector, identifies problems and the goal is to set conditions and standards for safe implementation of the blockchain technology to operation. According to the European Commission the blockchain technology should be understood as opportunity not a threat, nevertheless important and permanent problem are cyber security threats whereas applies that what today was safe, does not have to be safe one month later.
Andrea Pinna (DG-Market Infrastructure and Payments) presented view of the European Central bank to distributed ledger technology (DLT). ECB has two different views on DLT, firstly is perceived as a technology with possible utilisation in the payment systems and infrastructure, and secondly as ECB crypto currency. Currently ECB has two DLT projects in process. In one project ECB in co-operation with 17 central banks explores new technologies among which is also DLT and assesses eventual application of those technologies in payment systems. In second project named Stella, ECB cooperates with Japanese Central Bank with aim to deeper comprehend DLT technologies, but so far without intention to replace provided services with solutions based on DLT, since current technologies applied in RTS systems are sufficient. According to view of the ECB, DLT has potential to influence today’s form of the financial market but technology must be more developed.
Urs Sauer, chair of the working group for DLT established by the International Securities Services Association (ISSA) presented main results of the group. According to conclusions of the working group, lack of trust in integrity, safety and effectivity of crypto assets markets is principle obstacle preventing institutional investors from more intensive investing on such markets. Lack of trust is intensified by missing regulatory and legal background for crypto assets markets. Another major barrier is weak prevention of serious impacts and losses in case of loss of a private key. Services of market infrastructures operating in DLT environment can be provided only on networks with controlled access, not in public DLT networks. Moreover, question of settlement finality in DLT environment yet have to be solved. Urs Sauer concluded that even if application of DLT technologies would be targeted to decentralised services, the market infrastructures still will be important (guarantee of issue integrity; ensuring of settlement finality; standardisation; communication with centralised infrastructures).
Several examples of DLT applications were presented at the conference. Interesting project for the central depositories is new depository ID2S that already is a member of T2S community, but uses DLT technology only in limited scope as ID2S provides central depository services for short-term securities via T2S platform, settlement is made on accounts in T2S and in central bank money, and also user interface is built on traditional technologies.
Another case study was aimed at liquidity transfer for small and medium companies (LiquidShare), where DLT technology was applied to simplify finance and securities management processes.
Nasdaq introduced solution for proxy voting, in which was utilised their 15 years’ experience with provision of services for general meetings of companies and applied DLT technology for exchange of information among custodians and beneficial owners, collection of information required for voting and distribution of voting results. For authentication of users are used national identification cards.
Alexander Chekanov gave speech on behalf of the National Settlement Depository from the Moscow Exchange Group, which intends to provide services for clients who are interested to settle and keep registry of crypto assets, whereas the solution will be built on DLT technology.
(Author: Karol Gers)