The European Securities and Markets Authority (ESMA) has recommended significant amendments to the EU’s DLT Pilot Regime, responding to industry criticism that the current framework is too restrictive for digital securities platforms. In April, the French and Italian regulators also suggested changes.
The pilot program allows platforms to obtain waivers from some conventional financial regulations when handling tokenized securities. Examples of potential relaxations include settlement that doesn’t require central bank money, the ability to allow direct access to retail investors and the possibility of atomic settlement on a combined trading and settlement infrastructure. Each exemption is evaluated individually.
Since launch, only three institutions have received authorization: CSD Prague for settlement, 21X for trading and settlement, and 360X for trading. Just the first two are operational with limited activity. However, ESMA says that “despite an initially limited uptake, (it) is now seeing growing interest from potential applicants.” Ten applications are in the pipeline, including three planning trading and settlement systems from Axiology in Lithuania, Securitize in Spain, and LISE/Kriptown in France.
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