Crypto-assets are one of the main applications of blockchain technology and distributed ledger technology (DLT) in the financial field.

A pilot regime on DLT for market infrastructures

Therefore, in parallel with the MiCA (Regulation on Markets in Crypto Assets) proposal for a regulation, on 24 September 2020 the European Commission proposed a pilot regime on DLT for market infrastructures that would like to try to trade and settle financial instruments in the form of crypto-assets. This pilot regime is a so-called sandbox approach, a controlled environment that allows temporary derogations from the existing rules so that financial regulators may gain experience with the use of DLT in market infrastructures while ensuring that they can address risks to investor protection, market integrity and financial stability.

The aim of the DLT pilot regime is to allow companies to check and learn more about how the existing rules are applied in practice.

The DLT users under the pilot scheme will be following users licensed by the European Union (EU):

• investment firms and market operators, who will be able to apply for authorisation to organise and maintain a DLT multilateral trading facility;
• central securities depositaries who will be able to apply for authorisation to maintain the DLT settlement system.

The pilot regime also provides a new, non-traditional type of market infrastructure, the DLT trading and settlement systems, which will combine both the DLT multilateral trading facility, and the services provided by the DLT settlement system. The DLT trading and settlement systems must be either a DLT multilateral trading facility organised by an investment firm or a market operator authorised to organise and maintain the DLT trading and settlement systems or a DLT settlement system maintained by the central securities depository authorised to maintain the DLT trading and settlement systems.

A digital euro

One of the challenges of the EU's five-year plan is the introduction of the digital euro. This will be provided by the Eurosystem: the European Central Bank (ECB) and the EU national banks. In July 2021, the ECB launched a digital euro project (with a deadline of 24 months).

The DLT pilot regime will be used in the issuance of Central Bank Digital Currency (CBDC). The CBDC will be a digital representation of the euro at EU level. In this way, the ECB will be able to act as a catalyst for building up the new financial framework. The ECB's initiatives show that the DLT will be an essential pillar of the future digitalisation of the monetary system and, in particular, the financial system digitalisation.

The compromise text for the DLT pilot regime was drawn up in June 2021, the last trialogue meeting of the EC, the European Parliament and the Council of the EU was held in December 2021, the final version of the document was approved, and work is ongoing on the translation of the text into the EU's national languages. The DLT pilot regime will start operating following the publication of the legislation in the Official Journal of the EU and within the time limits specified in the legislation.