EU Main Regulator on Advantages of DLT

July 6, 2018

EU regulator, the European Banking Authority (EBA), has released a report on pros and cons of applying distributed ledger technology in financial sector.

The report covers the issue of fintech growing popularity. In particular, the EBA mentioned the two most preferable fields of application for blockchain: cross-border transfers and bank customer identification. The report says, using DLT and smart contracts there may play the key role in resolving most of the problems existing today.

“A number of opportunities emerge from the use of DLT and smart contracts for trade finance. The most promising are the potential efficiency gains, cost reduction, and lower risk of duplicate financing and loss or manipulation of documents.”

EBA adds that application of these technologies bears some risks. For instance, lack of legal regulation in the industry may complicate settlement of possible conflicts between the parties especially provided DLT-nodes are located in different jurisdictions.

“For example, a digitally signed contract might not be enforceable in all the jurisdictions. It is essential to establish the applicable jurisdiction, in case of conflict, and the dispute mechanisms, when a dispute arises.”

EBA also adds in its report, another matter which may cause problems with DLT is preventing incomplete or invalid data coming to each party of the network.


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