Central Securities Depositories are entities that hold securities and enable their transfer by book entry. These institutions provide centralized safekeeping for financial instruments, facilitating efficient and secure settlement of transactions. They maintain records of ownership and manage the transfer of securities between accounts, reducing physical movement and operational risks. CSDs serve as a critical component of traditional financial market infrastructure, supporting the integrity and liquidity of securities markets.
Context
The role of Central Securities Depositories is a subject of considerable discussion in the context of distributed ledger technology (DLT) and digital assets. While traditional CSDs operate a centralized model, DLT offers potential alternatives for securities record-keeping and settlement. Regulatory bodies are examining how existing CSD frameworks might adapt or interact with DLT-based systems to maintain market stability and investor confidence. The future involves assessing the interoperability between conventional and digital asset infrastructures.
The European DLT Pilot Regime's potential extension beyond 2026 provides critical regulatory certainty for tokenized securities market infrastructure development.
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