The greatest hindrance to the development of innovation into a full-fledged functioning concept is the chain of regulation that hampers it. Blockchain enthusiasts and major tech giants have heralded ledger based technology as path breaking and something that holds great potentiality in terms of applications. This has resulted in a host of Fintech startups taking interest in Blockchain and developing applications that can replace the existing legacy modules. Europe has been one of the central hubs of such innovation and the growing turmoil involving various Geo-political-economic issues has only helped the cause. Recently, Bitcoin.com reported on European Securities and Markets Authority (ESMA) opinion to ban blockchain platforms. However on Feb 7th, ESMA released a report contradicting the post. Let’s dive into further details of the report:
ESMA considers Blockchain regulation premature:
The European market regulatory agency has revealed that Blockchain Technology is in its nascent stages and regulating it would be premature. This could be deduced owing to the news that EU itself is thinking of launching crytpotcurrency wallets based on ledger technology. With Blockchain Technology facilitating for transactions in quick time and easing the way transactions can be verified across borders, EU considers regulation at such an early stage might hurt the innovation.
Building the framework for later stages of Regulation:
The Distributed Ledger based technology is currently being used for rewriting financial transactions in the most simple and efficient way. Apart from transactions, many firms have already employed Blockchain in post trade processing as it offers reduced costs. Since financial transactions and trade processing do require good amount of compliance, monitoring such support framework has to be made easy. Hence major efforts would be directed towards building a framework that supports Blockchain technology and also ensures regulation in financial transactions.
Why regulation would be important in the future:
It is true that regulation cannot understand or catch up with the speed of innovation but at the same time, it is very important to respect the safeguards that are put in place for every system in the form of regulations. Looking forward it is evident that Blockchain would play a major role in Transactional economics, post trade processing, identity verification and tracking of resources on a broader scale. With good amount of disruption to come, it is imperative that regulation that will monitor the technology is to be in place. Hence ESMA believes that the industry should work towards solutions to address the challenges posed by technology for keeping in mind the future consequences.