DLT Pilot Regime

The DLT Pilot Regime has started applying in the EU as of 23 March 2023. It provides the legal framework for trading and settlement of transactions in crypto-assets that qualify as financial instruments under MiFID II, while facilitating the set-up of new types of market infrastructures, including:

- DLT multilateral trading facility (DLT MTF)
- DLT settlement system (DLT SS)
- DLT trading and settlement system (DLT TSS)

“Tokenisation”, digital representation of financial instruments on a Distributed Ledger Technology (DLT) or the issuance of traditional asset classes in tokenised form to enable those assets to be issued, stored and transferred on DLT, is expected to open opportunities for efficiency improvements in trading and post-trading processes.
  • Development of: 
    • a) Crypto-assets that qualify as financial instruments and 
    • b) DLT market infrastructures, 
  • While preserving a high level of investor protection, market integrity, financial stability and transparency, and 
  • Avoiding regulatory arbitrage and loopholes.
DLT market infrastructures and their operators – who is eligible?
DLT market infrastructures and their operators – who is eligible?
  • Authorised investment firms and market operators may apply to operate a DLT multilateral trading facility (DLT MTF)
  • Authorised central securities depositories (CSDs) may apply to operate a DLT settlement system (DLT SS)
  • Both groups may apply to operate a combined DLT trading and settlement system (DLT TSS)
  • New entrants may apply for temporary authorisations as investment firms/ market operators or CSDs, alongside an application under the DLT Pilot Regime
Financial instruments in scope:
Financial instruments in scope:
  • Shares – market capitalisation/tentative market capitalisation below EUR 500 million
  • Bonds – other forms of securitised debt, including depositary receipts in respect of such securities or money market instruments with an issuance size of less than EUR 1 billion (corporate bonds from issuers whose market capitalisation did not exceed EUR 200 million at the time of their issuance are not subject to this threshold)
  • UCITS – market value of assets under management of less than EUR 500 million
Long-term outlook for the DLT Pilot Regime
Long-term outlook for the DLT Pilot Regime:
  • The DLT Pilot is set to run for a period of at least 3 years, with the possibility to be extended by the European Commission. 
  • The types of financial instruments covered by the DLT Pilot may also be extended.
  • If the DLT Pilot is successful, it could be made permanent by amending relevant Union financial services legislation to establish a single coherent framework.

ESMA’s role

Under the DLT Pilot, national competent authorities will authorise and supervise firms, while ESMA will have an important coordination and convergence role. For example, ESMA has issued Guidelines and Q&As and will continue to guide on several aspects of the DLT Pilot and will be able to give opinions on the national authorisations.

ESMA will publish on its website (on an ongoing basis):

  • the list of DLT market infrastructures, the start and end dates of their specific permissions, the list of exemptions granted to each of them, and any lower thresholds set by the competent authorities for each of them;
  • the total number of requests for exemptions that have been made under the DLT Pilot, indicating the number and types of exemptions granted or refused, together with the justifications for any refusals (this information will be published on an anonymous basis).