Uptake of EU’s DLT Pilot Regime “remains marginal” despite blockchain interest

French and Italian regulators Autorité des Marchés Financiers (AMF) and Commissione Nazionale per le Società e la Borsa (CONSOB) have jointly set out three proposals to make the EU’s DLT Pilot Regime “more competitive”. The two authorities claim that “a more suitable regulatory framework” is required to “allow for a real development in experimentations of distributed ledger technology (DLT)”.

Despite “growing interest” in blockchain technology, AMF and CONSOB describe the uptake of the DLT Pilot Regime as “marginal”. They believe that the EU “needs to better encourage innovation” to reap the benefits of this technology, especially in light of the savings and investment union (SIU).

Push boundaries

The first proposal suggests that the DLT Pilot Regime should be more flexible in order to encourage more experimentation. This could be achieved by introducing “greater proportionality, based on the size and nature of the project”. Wider authorisation should be given for the use of electronic money tokens (EMTs) and tokenised deposits for settling transactions. “Rapid implementation” of a central bank money settlement solution should be supported. The role of the European Securities and Markets Authority (ESMA) should be strengthened to “ensure consistency and convergence of practices across the EU”.

Bigger is better

The second proposal touches on scope, hinting that the DLT Pilot Regime has to remain competitive with “the regulatory framework in other financial centres” – most likely pointing to the Digital Securities Sandbox (DSS) in the UK. “The eligibility and capitalisation limits for infrastructures could be raised to allow testing of larger-scale projects, while granting ESMA with powers to review such limits to more timely adapt to market developments.” The list of eligible assets should also be expanded “to include more diversified financial products, such as structured bonds and some derivatives”.

Work together

The final proposal emphasises the importance of interoperability. “To successfully integrate DLT technology into the European financial sector, gateways need to be built between DLT infrastructure and traditional systems.” To achieve this, “the definition of common standards at European level is a crucial step”.