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European regulators are not aligned with their global
counterparts and could be holding back the potential
of blockchain technology with their misunderstandings
and misconceptions, writes Joshua Satten, director,
FinTech Practice, Sapient Global Markets.
T
Joshua Satten, director, FinTech Practice,
Sapient Global Markets
here’s a distinct lack of
detail or examination of
the current proof-of-con-
cepts and a real lack of nuance
around what is still a fairly nascent,
yet comprehensive, technology.
Perhaps we shouldn’t be surprised.
ESMA has a lot on its plate right
now with MiFID II. So where, with
its limited resources, it would find
the time to thoroughly research
DLT, let alone assess its market
implications is questionable. Odder
still, is how ESMA seems to have
completely ignored a research
report issued this past year by the
UK Government Office for Science.
Penned by the UK Government’s
chief scientific adviser, the report
praises the technologies’ poten-
tial and recommends real-life
adoption.
The issues described throughout
come across as odd considering
that markets globally are looking
towards technology to remedy
where man can’t or won’t help
himself.
The conclusions ESMA draws
from this path, specifically that it
is too early to regulate, are illogical
assertions to begin with. Is it feasi-
ble, let alone desirable, for ESMA
to regulate any technology or how
it’s used, beyond the auspices of
insider trading, market fixing, or
investor protection? There is a dan-
ger we must all keep in mind; by
reining in current activity within a
regulatory framework you run the
risk of stifling market fairness and
limiting innovation adoption.
It not just weakening from a com-
petitive perspective, it’s exponen-
“The fear of all fears:
that the buy-side will
trade with each other
and not need the sell-
side anymore.”
tially weakening from an architec-
tural perspective.
Fear of all fears
It’s true that any market would
theoretically benefit from sufficient
time to test scenarios and ideas in
different asset classes while getting
all participants from the buy-side,
sell-side and regulators comfort-
able so that it can manage these
processes, but it’s not realistic. And
it’s never been the driver behind
meaningful change, growth, or
market protection. Trader’s trade,
technologists innovate, regulators
penalise and safeguard. That ES-
MA’s paper offers less around the
Issue 52
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