On 10 October 2018, during the FinTech conference in Luxembourg, Mr Patrick Armstrong presented the ESMA approach to FinTech, especially DLT that underlies the blockchain protocol and cryptocurrencies. No changes are expected in that regard as ESMA is going to continue observing this technology.
Mr Armstrong stressed how important it is for a regulator to capture the pivotal moment in time when the scale of an innovative concept turns from negligible to non-ignorable. He reminded that ESMA’s objective is stronger protection of investors as well as promotion of stable and highly functional financial markets. He pointed to three possible approaches to FinTech:
1. restriction (banning) – as adopted towards binary options and Contracts For Difference instruments;
2. observation (changes over time) – as currently adopted towards DLT;
3. growth facilitation (active support and regulatory framework) – as adopted towards investment crowdfunding.
As regards DLT, the restrictive model was rejected because ESMA believes the technology is not a risk for the agency’s obejctives. A more proactive approach would reduce legal uncertainty and help accelerate growth, however the growth could expand in directions unexpected for the regulator, further leading the market players to accuse the regulator of premature interference with the market.
The ESMA representative believes that the today’s regulatory framework, which must be integrated by DLT innovators, is sufficient at this stage. In addition, ESMA is expecting the private sector players to assume the responsibility for implementing the new technology in compliance with the current regulations and with a view to the existing risks and their effective management.
The entire presentation is available here: https://www.esma.europa.eu/sites/default/files/library/esma71-99-1051_speech_on_cryptoassets_-_pa.pdf.