Today the Association for Financial Markets in Europe (AFME) published a paper on digital finance. It outlines a series of priorities, with tokenization and digital assets being one of five pillars. The others are data, DORA, artificial intelligence and the capital markets union (CMU).
A key priority is addressing regulatory issues affecting tokenization. A major one relates to central securities depositaries (CSDs) which aren’t always necessary for DLT-based securities. However, current legal requirements require their use for listed securities and collateral eligibility, including for European Central Bank (ECB) collateral.
Regarding the DLT Pilot Regime, AFME credited the effort put into launching it. However, it went live in March 2023 and so far there are no approved DLT platforms. AFME highlights issues raised by banks, ESMA and others, including the volume restrictions and uncertain timeframes discouraging usage.
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