On April 22, the European Securities and Markets Authority (ESMA) issued a call for information (Call for Evidence) on virtual currency. Unlike recent studies performed by the European Banking Authority and HM Treasury, ESMA is not calling for comment on virtual currencies as a payment technology or alternative form of money. In particular, ESMA is requesting information on three topics: 1) virtual currency investment products; 2) virtual currency based assets, securities and asset transfers; and 3) the application of distributed ledger technology to securities and investments. The Call for Evidence states that ESMA has been monitoring and analyzing virtual currency investment over the last six months to understand the developments in the market, the risk and benefits for investors, and the impact on market integrity and financial stability.
ESMA defines virtual currency investment products to include: collective investment schemes that invest in virtual currency related businesses and infrastructures; and derivatives such as options and contracts for differences that have virtual currencies as an underlying. ESMA is interested in learning more about those assets and securities as well as asset transfers that are virtual currency-based and are exclusively traded using virtual currency distributed ledgers. Distributed ledgers, also known as blockchains, are those facilities used as a means of issuing, transacting in and transferring ownership of specified assets (such as securities) in a way that bypasses the traditional infrastructure for the public offer and issuance of securities, including exchanges, central securities depositories or other means of recording ownership. In addition, ESMA has issued the Call for Evidence to understand the distributed ledger technology more generally as it applies to securities and investments, whether or not they are inside or outside a virtual currency environment.
ESMA states in the Call for Evidence that it will be monitoring the evolution of virtual currencies in the applications discussed above to ensure that regulatory authorities are aware of significant market developments. ESMA further stated that it had no preconceived view as to whether any other regulatory action is needed and has no immediate plans to introduce any regulatory action, subject to assessing the information received from the Call for Evidence.
The consultation period will be open until July 21.
A copy of EMSA’s Call for Evidence can be found here.