21 December 2021
EU ambassadors today endorsed the provisional political agreement, reached on 24 November, between the Council Presidency and the European Parliament’s negotiators on a pilot regime for market infrastructures based on distributed ledger technology (DLT). The pilot regime lays down the conditions for acquiring permission to operate a DLT market infrastructure, defines which DLT financial instruments can be traded and details the cooperation between the operators of DLT market infrastructures, national competent authorities and ESMA.
This agreement is an important step in making the EU fully fit for the digital economy. The pilot DLT regulation will contribute to strengthening our innovation and competitiveness in the field of digital finance. It will help delivering the benefits of digital finance for businesses and citizens while protecting consumers and preserving financial stability.
Andrej Šircelj, Minister of Finance of Slovenia
The DLT pilot regime aims to test the development of the European infrastructure for trading, clearing and settlement of DLT-based financial instruments. Crypto-assets are one of the main DLT applications for finance. Distributed ledger, broadly defined, is a consensually shared database through which a transaction is validated.
A provisional agreement between the Council and the Parliament was reached on the following main issues discussed during the negotiations:
- definition of the DLT market infrastructure
- thresholds for admission to trading or recording on a distributed ledger
- supervision: national competent authorities will remain in charge for the authorisation while the ESMA can issue an opinion on the application. The opinion would be non-public and non-binding but an explanation would be needed in case the national competent authorities decide to significantly deviate from it
- consumer protection: DLT operators will have mechanisms for handling clients’ complaints and their compensation
This pilot regime will be in place for three years, after which the Commission, based on advice from ESMA, should report to the Council and the Parliament on the costs and benefits of extending, modifying or ending it.
Background and next steps
The Commission proposed the DLT regulation in September 2020, together with the proposals on markets in crypto-assets (MiCA), digital operational resilience (DORA) and a complementing amending directive. This digital finance package bridges a gap in existing EU legislation, to ensure it does not pose obstacles to the use of new financial instruments. The package supports innovation and uptake of new financial technologies while providing for an appropriate level of consumer and investor protection.
The provisional political agreement on the DLT Regulation was endorsed by EU ambassadors in the committee of permanent representatives. It will now be formally adopted by the Council and the Parliament. It will then be published in the Official Journal of the European Union and enter into force.