ESMA seeks industry feedback to assess the liquidity of tokenized collateral during crises.

On October 9, according to Cointelegraph, the European Securities and Markets Authority (ESMA) has published a consultation paper seeking industry feedback on the legal, liquidity, and operational risks of tokenized collateral, to assess whether clearinghouses can promptly access and liquidate such assets into cash during market stress. This review will help determine whether existing EU regulations are sufficient to ensure that clearinghouses can effectively manage tokenized collateral upon member defaults, and assess whether additional regulatory measures are required.

ESMA Chair Verena Ross stated that conditions must be created for the safe and scalable cross-border operation of tokenized markets, ensuring legal certainty, infrastructure interoperability, and appropriate regulation. The consultation covers tokenized assets held in traditional financial infrastructure as well as those issued directly on distributed ledgers, while examining whether token transfers confer ownership or enforceable rights to underlying assets, and their interactions with stablecoins, central bank money, and tokenized deposits.