CSD Prague to operate first DLT settlement system
15 October 2024 Czech Republic
Image: mila103/stock.adobe.com
The Central Securities Depository (CSD) in Prague will be the first institution to operate a distributed ledger technology (DLT) settlement system under the European DLT Pilot Regime.
As part of the temporary regulatory framework, the Czech National Bank granted the approval, following notification from the European Securities and Markets Authority (ESMA).
The CSD can offer issuers of book-entry securities registration of issues in the newly created DLT-based registry from 18 November.
This technology has the potential to revolutionise the financial sector, particularly in the way securities are recorded and trades are settled, according to the CSD.
Ond艡ej Dus铆lek, CEO of the CSD, says: 鈥淭he new European regulation has allowed us to implement DLT on a meaningful project. I believe that this will contribute to the development of the capital market in our country, as this platform will bring alternatives for financing small and medium-sized companies through the subscription of bonds or shares without the need for additional intermediaries.
鈥淭his platform will have a great added value for companies offering employee stock ownership plans (ESOPs) and also opens up huge opportunities for fintech companies, such as crowdfunding platforms, that can connect directly to DLT from the position of a node and offer their clients additional service in the securities field.鈥�
The new technology allows the maintenance of a securities account, as well as the crediting of shares or bonds to this account as part of a primary subscription, an issue increase, or a transfer from another account based on an agreement with the counterparty.
These operations can be carried out with or without cash settlement, and anyone can open an account with the CSD with a Bank ID through the web or mobile application.
The platform will also be open for other financial market companies to become one of the DLT nodes of record, enabling them to open DLT accounts for clients and enter transfers in their systems within their client applications.
DLT registration is fully compliant with Czech law and meets all the requirements of book-entry securities, in particular the requirements of the civil code or the Commercial Corporations Act.
Only one type of account can be opened in the DLT records 鈥� the owner鈥檚 account, which means that the account holder is also considered the owner of the securities held in the account, and can thus exercise shareholder or other rights associated with the security.
The web or mobile applications then inform the account holder of the status and changes to the asset account, current debits, or transactions, including money transfers, and send notifications of any changes to the mobile phone.
The DLT Pilot Regime started applying in the EU in March 2023, providing the legal framework for trading and settlement of transactions in crypto-assets that qualify as financial instruments under MiFID II, while facilitating the set-up of new types of market infrastructures.
As part of the temporary regulatory framework, the Czech National Bank granted the approval, following notification from the European Securities and Markets Authority (ESMA).
The CSD can offer issuers of book-entry securities registration of issues in the newly created DLT-based registry from 18 November.
This technology has the potential to revolutionise the financial sector, particularly in the way securities are recorded and trades are settled, according to the CSD.
Ond艡ej Dus铆lek, CEO of the CSD, says: 鈥淭he new European regulation has allowed us to implement DLT on a meaningful project. I believe that this will contribute to the development of the capital market in our country, as this platform will bring alternatives for financing small and medium-sized companies through the subscription of bonds or shares without the need for additional intermediaries.
鈥淭his platform will have a great added value for companies offering employee stock ownership plans (ESOPs) and also opens up huge opportunities for fintech companies, such as crowdfunding platforms, that can connect directly to DLT from the position of a node and offer their clients additional service in the securities field.鈥�
The new technology allows the maintenance of a securities account, as well as the crediting of shares or bonds to this account as part of a primary subscription, an issue increase, or a transfer from another account based on an agreement with the counterparty.
These operations can be carried out with or without cash settlement, and anyone can open an account with the CSD with a Bank ID through the web or mobile application.
The platform will also be open for other financial market companies to become one of the DLT nodes of record, enabling them to open DLT accounts for clients and enter transfers in their systems within their client applications.
DLT registration is fully compliant with Czech law and meets all the requirements of book-entry securities, in particular the requirements of the civil code or the Commercial Corporations Act.
Only one type of account can be opened in the DLT records 鈥� the owner鈥檚 account, which means that the account holder is also considered the owner of the securities held in the account, and can thus exercise shareholder or other rights associated with the security.
The web or mobile applications then inform the account holder of the status and changes to the asset account, current debits, or transactions, including money transfers, and send notifications of any changes to the mobile phone.
The DLT Pilot Regime started applying in the EU in March 2023, providing the legal framework for trading and settlement of transactions in crypto-assets that qualify as financial instruments under MiFID II, while facilitating the set-up of new types of market infrastructures.
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