Alpay Soytürk, the Chief Regulatory Officer of Spectrum Markets, has shared with Cointelegraph an analysis of the DLT Pilot Regime that entered into force in the EU on March 23 by virtue of Regulation 2022/858.
The objective of this regulation is to develop the trading and settlement of financial instruments issued through DLT-based systems. Distributed Ledger Technology (DLT) is a type of decentralized ledger that uses consensus algorithms, cryptography, and other design concepts.
DLT has been used to apply the universe of products or services in the decentralized ledgers of companies, such as central counterparty entities (or CCPs) and credit default swaps (Credit Default Swap or CDS in English), among others.
In addition, the technology DLT allows the integration of the complete life cycle of a tradable security in the trading venues, from its listing to its trading on a secondary market, including post-trade operations and custody.
Soytürk explains that the chain of necessary threads and messages sent back and forth between the systems of various entities in the course of a transaction is long and complex, making the overall process slow, error prone, exposed to risk. unnecessary and, lastly, expensive.
However, the implementation of DLT technology, although it has great potential, also presents challenges that must be overcome, such as the size and interconnection of post-trade infrastructures, the lack of standardization of DLT or the design of the existing trading process as a whole.
For example, in Spain, the Securities Markets and Investment Services Bill includes developments based on this technology as one of its main objectives.
In general, DLT technology has the potential to improve efficiency and reduce costs in all processes throughout the life cycle of transactions in capital markets.. Although there are currently challenges to overcome, DLT is a promising technology that offers many opportunities in finance and business in general.
The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information presented here should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.
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