An executive board member of the European Central Bank (ECB) says that regulators will play a pivotal role in creating a new capital market for digital assets.
In a speech at an event in Frankfurt, Germany, Piero Cipollone says that new digital asset technologies hold promise in improving financial integration in Europe that is being hounded by market complexities and regulatory fragmentation.
“Non-interoperable technological ecosystems in each country – shaped by diverging national regulatory regimes – have created siloed pools of asset liquidity, further entrenching fragmentation.
However, recent advancements in digital technology offer an opportunity to create an integrated European capital market for digital assets – in other words, a digital capital markets union.”
Cipollone says authorities should take action as financial institutions increasingly explore the potentials of tokenization, the process of issuing or creating assets in digital form using distributed ledger technology (DLT).
Cipollone says tokenization and DLT solutions could tackle technological obstacles that prevent the establishment of a capital markets union in Europe. He says the failure of the public authorities to act could lead to fragmentation.
“Imagine a future where money and securities no longer sit in electronic, book-entry accounts but “live” on distributed ledgers held across a network of traders, each with a synchronized copy.
This transition could help us deal with the current fragmentation of financial infrastructures, reduce barriers to entry and serve as a driver of capital market integration in Europe.”
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