CPMI publishes an analytical framework for DLT

By Giovanni Campi and Ignasi Guardans

The Committee on Payment and Market Infrastructures (CPMI) of the Bank for International Settlements (BIS) recently released a report that focuses on the potential impact of distributed ledger technology (DLT) on payment, clearing and settlement.

In providing an analytical framework to approach DLT, CPMI hopes to enhance authorities and market participants’ understanding of this technology. The report reviews the potential implication of DLT for the efficiency and safety of payment, clearing and settlement activities. The last part also analyzes broader implications of DLT for financial markets, in terms of market architecture and connectivity.

The report concludes that DLT brings potential improvements and benefits but that there are still many issues to be addressed before benefits can be fully realised. The framework in particular needs to be clarified to take into account DLT specificities. CPMI also calls for the set-up of robust governance structures, together with appropriate technology solutions and data controls. CPMI also takes the view that future changes brought by DLT to payment, settlement and clearing are more likely to be incremental than radical.

The recent CPMI report confirms a trend towards increased regulatory attention given to FinTech in general and DLT in particular. In February 2017, the International Organisation of Securities Commissions (IOSCO) published a research report on FinTech’s applications to securities markets. A month earlier, the European Securities and Markets Authority (ESMA) published a report assessing potential applications of DLT to securities markets. Moreover, also in January 2017, the European Agency for Network and Information Security (ENISA) also looked at DLT, analysing its impact on cybersecurity issues for the financial sector, and noting areas where improvement is particularly needed, such as privacy preserving and interoperability between DLT protocols. More recently, on 23 March, the European Commission launched a public consultation on FinTech to inform and further develop its policy approach towards technological innovation in financial services.

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