Overview of Distributed Ledger Technology (DLT)
A recent report sheds light on various aspects of Distributed Ledger Technology (DLT), especially focusing on the business models involved, the types of financial instruments linked to DLT, and the technical and legal challenges faced by regulatory supervisors. Additionally, it explores the exemptions requested by DLT market infrastructures and discusses the stipulations under which National Competent Authorities (NCAs) have permitted these exemptions, including any risk mitigation strategies imposed.
Timing and Interest in the DLT Pilot Regime
The timing of this report aligns with a critical phase in the DLT Pilot Regime. Initially, the program attracted limited interest, but there has been a notable increase in the number of applicants showing curiosity about potentially participating in the regime. This resurgence highlights the necessity for ongoing enhancements to ensure the regime remains appealing and effective.
Strategic Proposals by ESMA
To capitalize on this growing interest, the European Securities and Markets Authority (ESMA) has put forward strategic proposals aimed at the European Commission (EC). These recommendations, which were formulated with input from NCAs and the European Central Bank (ECB), focus on enhancing the DLT Pilot Regime’s market appeal and suggest making the regime permanent with more adaptive regulatory thresholds and asset eligibility that correspond to the varied risks associated with different business models.
Future Considerations and Recommendations
These suggestions will align with the EC’s forthcoming public consultation regarding the DLT Pilot Regime, which is part of the broader dialogue surrounding the Savings and Investments Union (SIU).
Looking ahead, the European Commission is anticipated to deliver its own findings to the European Parliament and the Council within three months after receiving ESMA’s report. Based on the recommendations from the EC, the DLT Pilot Regime could undergo extension, revision, or be transitioned into a permanent regulation. Should the regime be extended, ESMA stands ready to provide a follow-up report within the adjusted timeline and continue its technical collaboration with all relevant stakeholders.
