A European Central Bank (ECB) executive says regulators will play a crucial role in creating a new capital market for digital assets.
Speaking at an event in Frankfurt, Germany, Piero Cipollone says new digital asset technologies hold promise in improving financial integration in Europe, which is being challenged by market complexity and regulatory fragmentation.
“Non-interoperable technology ecosystems in each country – shaped by differing national regulatory regimes – have created isolated pools of asset liquidity, further entrenching fragmentation.
However, recent developments 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 must take action as financial institutions increasingly explore the possibilities of tokenization, the process of issuing or creating assets in digital form using distributed ledger technology (DLT).
Cipollone says tokenization and DLT solutions can address technological obstacles preventing the creation of a capital markets union in Europe. He says the government’s inability to act could lead to fragmentation.
“Imagine a future where money and securities no longer reside in electronic cash accounts, but ‘live’ on distributed ledgers maintained by a network of merchants, each with a synchronized copy.
This transition could help us deal with the current fragmentation of the financial infrastructure, reduce entry barriers and serve as a driver for the integration of capital markets in Europe.”
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