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CSSF publishes DLT white paper

Blockchain3Luxembourg’s financial regulator, the Commission de Surveillance du Secteur Financier (CSSF) has issued guidance on the due diligence process for financial firms implementing distributed ledger technology (DLT).

The regulator’s white paper has been prompted by the rising number of use cases involving DLT or blockchain and the concern that not all financial institutions have the technical skills required for implementing the technology and may overlook the inherent risks.

At the same time, the CSSF states that its paper is “non-binding” and takes a technology-neutral stance on innovative projects.

“As regulators, our job is to ensure the safety and soundness of the financial sector,” said Cécile Gellenoncourt, head of department, supervision of information systems and support PFS at the CSSF. “Regarding financial, we need to balance prudent risk-based supervision with proactive support for positive innovation.”

This white paper has been produced by the regulator’s ICT risks supervision and financial innovation teams along with a panel of external contributors.

The contents include the main actors and roles that would be involved in a DLT implementation along with the potential governance and technical risks that could occur in such projects.

The paper produces a set of questions and recommendations for financial firms to follow.

The publication coincides with the announcement that the Luxembourg Stock Exchange has listed its first security tokens registered on a public blockchain. The tokens are digital bonds and structured products issued by Forge, Societe Generale’s digital assets arm.

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