CSD Prague reportedly received its first European DLT register approval.
The Central Securities Depository (CSD) claims that is focused on leading innovation in the European capital market with the introduction of DLT (Distributed Ledger Technology).
This technology has the potential to significantly enhance the financial sector, particularly in the way securities are “recorded and trades are settled.”
The CSD was reportedly the “first” institution in the world to be authorized under the European DLT Pilot Regulation in order to operate a DLT settlement system. As stated in the update, the CSD received the authorization from the Czech National Bank with notification from the European regulator ESMA.
As a result of this, the CSD can now reportedly offer issuers of book-entry securities registration of issues in the newly created DLT-based registry “from November 18, 2024.”
This tech allows for 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. Anyone can open an account with the CSD simply by “using BankID and accessing it through the web or mobile application available at https://www.cdcp.cz/?lang=en.”
But the platform will also be open for other financial market companies to become one of the DLT nodes of record, which will open up the possibility for them to open DLT accounts for clients and “enter transfers in their systems within their client applications.”
Ondřej Dusílek, CEO of CDCP said that the new European regulation has allowed them to implement DLT on a meaningful project.
They 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.”
They also noted that this 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 “
DLT registration is fully compliant with Czech law and thus 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, “namely the owner’s account.”
An owner account 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 apps 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 apps are said to be “available 24 hours a day and 7 days a week.”
Ondřej Dusílek added that the advantages of the new DLT registration include the ability to simplify the entire book-entry process for issuers and security holders, while maintaining the “transparency and security of the current central CSD registry.”
They further noted that when compared to paper securities, book-entry in the form of tokenization in the (distributed ledger tech) DLT registry brings various “additional services for all entities” with full digital access without any concerns and “legal uncertainties.”