Today, 19 March 2020, the European Central Securities Depositories Association (ECSDA) welcomes the initiative of the European Commission (EC) and wishes to share the views of Central Securities Depositories (CSDs) on this consultation. CSDs share many of the views of the European Commission expressed in the consultation. Our consultation response focusses mainly on tokens other than stablecoins.

In addition to the answers to the consultation questions, ECSDA’s main considerations regarding the consultation are the following:

1. CSDs innovate, including using DLT. ECSDA members have been constantly working on increasing efficiency and finding innovative solutions, while complying with the EU legislation and in constant dialogue with the market stakeholders. Many CSDs are working on innovation projects, including DLT-based solutions, and some are already using DLT as part of their core system or ancillary services in production. CSDs aim at supporting any business models and mature technology that may contribute to an efficient and safe market infrastructure for any type of assets.

2. Current EU legislation (like CSDR, SFD and FCD) is technology-neutral and fit for purpose for investment tokens. It was built for achieving the goal of investor protection and mitigation of systemic risks, not to support a specific technology. It provides for key safeguards enabling stakeholders, such as issuers, intermediaries and other service providers, to operate in a clear environment with limited risk. These safeguards are relevant for servicing any type of assets, disregarding the underlying technology used. Hence, we share the perspective expressed in the consultation that any future legislation should also be technology-neutral.

3. Incorporating crypto-assets not falling under the current regulation into the existing financial regulatory framework, where appropriate, will inject trust and legal certainty, enable their quick adoption, address financial stability, consumer protection and market integrity needs. In the cases where this would not be appropriate (e.g. stablecoins) and, hence, where there may be a bespoke regime (involving a different regulatory framework and/or approach of the authorities), stakeholders, in particular issuers and investors, will gain by being serviced by a trusted entity. It might be considered whether the Principles for Financial Market Infrastructures would provide the right basis for its regulation.

Read the full response

On Monday, 16 March 2020, ECSDA responded to the European Commission on Digital Operational Resilience.

ECSDA strongly supports the European Commission (EC) in pursuing the work on operational resilience and extending the resilience expectations to all relevant financial market stakeholders.

We believe that this has a potential to increase the overall level of financial stability of the European financial services network and its investor protection.

The ability of a Central Securities Depository (CSD) to build and maintain its operational integrity and the full range of operational capabilities, is a key determining factor to conduct CSD business in due care of financial stability. Hence, CSDs find it important to contribute to the construction of the future European operational resilience framework.

Our views can be summarised around the following main considerations, the importance of which we would like to ask the EC to consider:

• Convergence of National Competent Authorities approaches
• Comprehensiveness of the framework and interdependency of actors
• Risk-based approach

Read the full response.

On Thursday 13 February, ECSDA has hosted on Clearstream and Deutsche Börse premises, an industry dialogue focused on the ECSDA CSDR Penalties Framework and on settlement discipline related issues. It was a fruitful discussion, involving participants from other industry associations and representatives other FMIs and intermediaries.

During the day, ECSDA presented the main features of the implementation of Settlement Discipline by CSDs, and also a Q&A session on open items and next steps.

The questions and answers have now been integrated in the slides presented during the event on 13 February (please find the link below). ECSDA will integrate the answers to the questions received from participants in the next version of the ECSDA Penalties Framework, when possible.

We will keep you posted on the next steps, and inform about the publication of the next version of the ECSDA Penalties FW document as soon as possible.

SWIFT and EurexSTS also presented their ongoing developments related to CSDR Settlement Discipline.

Please find all presentations here below:

• ECSDA CSDR Penalties Framework presentation
• SWIFT presentation on CSDR Standards – Messaging
• EurexSTS Buy-in Agent Services