[ESMA70-460-189 - Heading 7 - Question 2]

Answers provided by the European Commission in accordance with Article 16b(5) of the ESMA Regulation

Both of the described modalities of issuance are indeed possible under the DLTPR. That is implied by its recital 3 which explicitly refers to two ways in which financial instruments can be issued on DLT – by digitally representing a financing instrument on DLT and by issuing a traditional asset class in tokenised form.

The former mechanism corresponds to the situation described under 1) of the question, whereby a financial instrument begins its lifecycle by being issued directly on a DLT market infrastructure using DLT.

The latter mechanism corresponds to the situation described under 2) of the question, whereby an existing non-DLT financial instrument is recorded and thereby represented in tokenised form on a DLT, and continues its lifecycle as a DLT financial instrument. In such a case, the token serves as the main reference point for further events relevant to the lifecycle of that instrument, such as trading and settlement.

However, since the DLT Pilot regime is meant to enable DLT Pilot participants to flexibly experiment with DLT in organizing trading and settlement of financial instruments, it cannot be excluded that DLT Pilot participants might put forward models that do not clearly fit into the two modalities of issuance of DLT financial instruments described above. The legal feasibility of each contemplated model should be assessed on a case by case basis.

 

Disclaimer in relation to the answers provided by the European Commission in accordance with Article 16b(5) of the ESMA Regulation: these answers clarify provisions already contained in the applicable legislation. They do not extend in any way the rights and obligations deriving from such legislation nor do they introduce any additional requirements for the concerned operators and competent authorities. The answers are merely intended to assist natural or legal persons, including competent authorities and Union institutions and bodies in clarifying the application or implementation of the relevant legal provisions. Only the Court of Justice of the European Union is competent to authoritatively interpret Union law. The views expressed in the internal Commission Decision cannot prejudge the position that the European Commission might take before the Union and national courts.