The European Central Bank has issued a commentary examining mechanisms for encouraging blockchain development and adaptation, in its latest move around the technology.
Following on from a project announced with the Japanese central bank from late 2016, the ECB commentary looks at ways in which the central bank, and a European approach to regulating blockchain development, could be used to spur additional research, development and implementation of the technology.
As part of the ECB’s review of capital markets, the research paper commented on what it sees as the potential for blockchain technology to have a significant role in European capital markets in future.
While broadly supportive of more blockchain, however, the bank was quick to highlight the conditions that must be met before it could fully endorse the blockchain at the core of financial marketing.
Among those conditions is legal certainty for digital currencies and their status, legal recognition and protection of data stored on the blockchain, and a unified regulatory position for developing and using the technology across the block.
At the same time, they were keen to stress that the best approach for the time being was one that encouraged innovation and development, rather than excessively regulating this developing technology.
According to the paper, which was produced in partnership with the European Commission, the bank said it would continue to take a light touch approach, while ensuring member states continue to harmonize their legislative approaches.
"The ECB suggests that the current efforts towards the development of harmonized and principle-based regulation and legislation across member states be reinforced. This would ensure that market participants developing new services and technologies are not limited by different national legislations and by the risk of unexpected regulatory changes."
The European Central Bank has been a strong proponent of the potential of blockchain technology, if not initially reluctant to introduce the prerequisite conditions it lays out for the blockchain.
It is not alone in this position, with central banks from around the world adopting similar approaches to blockchain technology.
By allowing room for innovation, they argue, central banks can continue to nurture and develop the technology underpinning the blockchain, and its various industry-specific use cases.