Europe’s securities supervisor, the European Securities and Market Authority (ESMA), has recently addressed a paper to Bitcoin businesses, asking for their advices on digital currency’s underlying technology, the blockchain.
The paper has been published after six months of rigorous monitoring of the Bitcoin’s public ledger system, specifically to understand its practical implementation and potential risks in the mainstream finance market. Excerpt:
“ESMA is interested in how different virtual currencies and the associated blockchain, or distributed ledger, can be used in investments. There are now facilities available to use the blockchain infrastructure as a means of issuing, transacting in and transferring ownership of securities in a way that bypasses the traditional infrastructure.”
The European regulator has however kept its focus centered on the investment products in which virtual currencies like Bitcoin simply acts as a mere underlying asset. They include anything from non-derivative product to contracts for difference to binary contracts. The only reason the term “blockchain” ever entered the paper is for its ability to act as a custodian by recording contracts publicly. ESMA simply wants to know whether this public ledger system could be used for other applications as well, that too without requiring a virtual currency.
“A distributed ledger technology,” says the paper, “could be used to record offers, transactions in or transfers of ownership or other rights in a ‘traditional’ security, whether by ‘traditional’ or new-entrant providers. In this context, the technology might not be dependent on the use of a virtual currency.”
However, it ends up asking a plentiful of questions regarding the use of virtual currencies like Bitcoin in terms of investments, securities, assets, and means of transfer ownership of value. You can read them here.