While DLT is a technology that has been used for many years, the integration of such evolving technology-based innovation in financial services and markets is a continuing challenge for regulators. In this context, the CSSF just issued a white paper aiming at encouraging stakeholders to conduct a proper assessment of the risks related to the Distributed Ledger Technology and its use in the provision of services in the financial sector.

Institutions seeking to offer services based on DLT, which do not necessarily have all the technical skills required for its implementation, may tend to overlook the risks inherent with this technology. Like any other technology, the DLT entails specific risks that must be understood, mitigated and monitored.

The CSSF white paper is a document that is both educational and thought-provoking. It primarily targets professionals being financial and non-financial institutions providing or intending to provide services to the Luxembourg financial sector. This non-binding document invites any stakeholder to consider the concrete implications of the use of a DLT in the provision of its services.

In line with the technology-neutrality principle applied by the CSSF, this white paper does not by any means whatsoever constitute a positive or negative assessment of the DLT itself which, whilst it entails specific risks, may offer important advantages when properly implemented and used. The white paper’s purpose is to ensure that both risks and advantages are adequately and appropriately taken into consideration by the financial sector. To that extent, it aims to:

• Identify the key components of a DLT and the different types of DLT available; 

• Highlight the roles and responsibilities of the different actors in the use of a DLT (i.e. DLT developer, infrastructure provider, solution provider and users); and 

• Emphasize some of the main risks related to the DLT, both in terms of governance and technical risks.

The white paper is available for download here