Distributed Ledger Technology (DLT)
Distributed ledger technology (DLT) is not a regulation, but a digital record of ownership that differs from centrally administrated ledgers. In DLT, the ledger is replicated among many different ‘nodes’ in a peer-to-peer network. The ledger is maintained by a network of decentralised computers that verify transactions.
DLT has caught the attention of many in the financial sector. Because of this, the European Securities and Markets Authority (ESMA) has researched the position of DLT in the securities markets to assess whether a regulatory response is required. According to ESMA, there are two ways to integrate DLT into the securities markets: to improve internal processes and to replace the setup of participants and infrastructures. ESMA has not identified major impediments in the EU regulatory framework that may prevent the emergence of DLT in the short term.
1Implementation / enforcement 06/2016 - 01/2020
We believe that interest in distributed ledgers will continue to grow around the globe. Public institutions as well as private companies are taking measures to automate their internal and external processes.
Regulation that is applicable to the securities market is technology-agnostic and should be considered when designing DLT solutions. Regulators should also favour the emergence of DLT and could even become active participants of DLTs by, for instance, blocking transactions for specific participants for anti-money laundering purposes or enforcing restrictions.
Industries need to improve their skills and competencies in order to be ready when the technology attains maturity. A whole new range of opportunities to engage with each other are likely to be available in the foreseeable future.
KPMG: Digital Ledger Services