EU Proposes 'Bank Settlement Schemes' for Tokenized Securities – Opening Question Whether Future Needs One CSD

The European Commission presents a proposal that would allow banks to operate their own settlement systems for tokenized securities. This step opens a fundamental question about the future of central securities depositories (CSD).

Proposal Essence

The proposal envisions:

• Possibility for banks to operate DLT-based settlement
• Alternative to traditional CSDs
• Regulatory sandbox for testing

Arguments For

• Higher efficiency and settlement speed
• Lower costs for issuers
• Innovation in capital markets

Arguments Against

• Market infrastructure fragmentation
• Systemic risks in case of failure
• Regulatory arbitrage

What It Means for CSDs

Traditional central depositories face an existential challenge:

• Must innovate or risk losing relevance
• May transform into DLT providers
• Regulators will need to balance innovation and stability

This proposal may fundamentally change the architecture of European capital markets.