The European Securities and Markets Authority (ESMA) is investigating the use of digital currencies and blockchain technology for investment products, notably financial assets and derivatives.

The EU markets watchdog, which is "seeking to understand investment using virtual currency and distributed ledger technology," has issued a call for evidence on Wednesday, to solicit market participants to share their feedbacks and experiences on virtual currency investments.

The ESMA, which has been monitoring and analyzing the development of virtual currency investments for the past six months, is looking to understand the wider impact and potential of these technologies beyond their use as a payment method.

"ESMA is not expressing any view on the desirability or otherwise of virtual currencies as such or on their use as, for example, means of payment," the authority said, before mentioning that the European Banking Authority (EBA) had previously released an Opinion addressing the "70 risks" affiliated to the use of virtual currencies as a mean of payment, back in July 2014.

Through its call of evidence, the ESMA is looking to gather inputs on three particular topics, namely:

  • Investment products, which have virtual currency as an underlying;
  • Investment in virtual currency based assets/securities, and the transfer of those assets/securities;
  • Other uses of the distributed ledger in relation to investment.

Among the noteworthy questions, the ESMA asks:

"How is distributed ledger technology being used or likely to be used in relation to the issuance, distribution, trading, recording of transactions and ownership of 'traditional' securities or investment products and why?"

Another inquiry reads:

"To what extent is the use of distributed ledger technology in relation to ‘traditional’ securities or investment products being separated from an associated virtual currency and, if so, how and why?"

Although, the ESMA said it has "no pre-conceived view as to whether any other regulatory action is needed and, [...] has no immediate plans to take any," the authority did state that it is looking "to ensure that regulators are aware of significant market developments."

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