The BIS Committee on Payments and Market Infrastructures has published a paper (PDF 524 KB) on the use of distributed ledger technology (DLT) in payment, clearing and settlement systems.

This proposed analytical framework suggests that DLT should bring benefits in terms of reduced complexity, more efficient processing, reduced need for reconciliations, increased transparency and improved network resilience.

However, supervisors of financial market infrastructure should remain alert to the risks that DLT may bring, in particular:

  • Operational and security issues
  • Lack of interoperability with existing processes and infrastructure
  • Ambiguity relating to settlement finality
  • Legal underpinning of DLT
  • Absence of a robust governance framework overseeing the DLT arrangements
  • Data integrity, immutability and privacy.

We can expect regulated firms offering or using DLT to be challenged by supervisors on how firms identify, measure and control these types of risk.

To discuss this further, please contact a member of the EMA Financial Services Risk & Regulatory Insight Centre.

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