10 March 2023

ESMA's Ross at CONSOB, Rome: Digital finance and capital markets – securing the frontier

Today I will start by discussing some key technological developments and the benefits and risks they bring. One overarching risk – and an inescapable feature of the digital age – is cyber risk.

The conference theme of frontiers in digital finance is a vivid one: we can imagine technology pushing back the boundaries of what is possible, enabling financial entities and investors to explore new ways of interacting and doing business. Historically, exploring frontier regions could be an exciting and fruitful task, but also a risky one. New territory can contain hidden dangers.
Today I will start by discussing some key technological developments and the benefits and risks they bring. One overarching risk – and an inescapable feature of the digital age – is cyber risk. At the cutting edge of technology and innovation, authorities need to promote a secure and resilient environment as far as possible. I will go on to set out how ESMA, the other ESAs and NCAs are working hard in this respect, and the challenges that lie ahead.
Digitalisation reshapes financial markets
Capital markets – and the wider financial sector – continue to undergo a digital transformation. Finance fundamentally involves storing and retrieving information; in particular, about ownership rights and obligations. Where financial firms once had offices and depositories with stacks of paper in filing cabinets, they now have computer servers – either on site or remotely hosted – encoding financial and personal data in digital form. Across the wider economy, data generation, use and storage have grown exponentially for decades. The sheer scale is now hard to comprehend in ordinary terms. Roughly speaking, a single megabyte of data encodes something like the information found in a book. Across the globe, the equivalent of trillions of books are now created every hour, in various formats. 

Digital technology continues to shape the way capital markets operate and the way intermediaries provide financial services. Firms across the financial sector are increasingly linked digitally as they transact and communicate electronically. Technologies such as APIs enable data to be readily accessed across systems, including by third parties that provide analytics and compliance tools....

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