Regulatory bodies in France and Italy suggest revising the Digital Ledger Technology (DLT) Test Regime framework

Regulatory bodies in France and Italy suggest revising the Digital Ledger Technology (DLT) Test Regime framework

The European regulators are pushing for significant changes to the DLT Pilot Regime, aiming to remove barriers that have hindered uptake and innovation in distributed ledger technology (DLT). Marie-Anne Barbat-Layani, Chair of the AMF, and Paolo Savona, Chair of CONSOB, have emphasised the importance of establishing a competitive framework for DLT innovation and market testing to better measure its potential benefits.

Currently, the DLT Pilot Regime sets activity limits that larger infrastructures find too small to be worthwhile. To address this issue, proposals suggest allowing a pathway towards full uncapped adoption, enabling larger-scale projects and more serious experimentation.

Another key focus is enabling cash settlement with MiCA-licensed stablecoins. Current rules restrict cash settlement to e-money tokens issued by credit institutions, which ESMA and national regulators see as a barrier. The new proposals support permitting settlement with euro-denominated stablecoins licensed under the Markets in Crypto-Assets Regulation (MiCA), aiming to increase efficiency and give a boost to European stablecoins.

Clarity around the pilot regime’s duration has also been identified as a concern, with miscommunication creating uncertainty that discourages participation. Clearer timelines and regulatory messaging are part of the proposed enhancements.

In addition, the regulators propose 'greater proportionality' based on the scale of the project in the DLT Pilot Regime. This means that smaller projects may face less stringent regulations, promoting the benefits of DLT to both issuers and investors.

So far, only two projects have been approved under the DLT Pilot Regime: CSD Prague for settlement and 21X as a combined exchange and settlement venue. 21X operates on a permissionless blockchain, but participants require permissions. For settlement purposes, 21X uses stablecoins or electronic money tokens (EMTs). Retail investors can participate directly in 21X, but compensation is required if something goes wrong.

The regulators also express a desire for rapid support for a central bank money settlement solution, which the European Central Bank has announced. They suggest common EU standards for interoperability with legacy systems to facilitate integration with existing financial infrastructures.

The proposed changes to the DLT Pilot Regime are intended to make it more attractive to innovators and investors, addressing structural impediments like scale, settlement options, and predictability. They are part of a broader effort to ensure EU leadership in DLT innovation and avoid becoming a "regulatory fly-over zone" in the digital asset space.

Both French and Italian regulators have expressed support for these improvements as part of their approach to DLT innovation. No specific country-level changes distinct from the EU-wide framework were detailed in the sources, but the emphasis on stablecoins and uncapping volume reflects their goals to stimulate more robust pilot projects and integrations with financial infrastructures such as central bank money settlement initiatives ongoing in the Eurosystem.

The regulators also propose extending the duration and clarifying the exit process of the DLT Pilot Regime, but no new licenses have been granted so far by AMF or CONSOB.

1. The regulators aim to remove barriers and promote innovation in distributed ledger technology (DLT) by pushing for significant changes to the DLT Pilot Regime.
2. To make the DLT Pilot Regime more attractive to innovators and investors, proposals suggest allowing a pathway towards full uncapped adoption of larger-scale projects.
3. The New proposals support permitting settlement with euro-denominated stablecoins licensed under the Markets in Crypto-Assets Regulation (MiCA) to increase efficiency and boost European stablecoins.
4. Clarity around the pilot regime’s duration and regulatory messaging are part of the proposed enhancements, aiming to alleviate uncertainty and encourage participation.
5. The regulators propose 'greater proportionality' in the DLT Pilot Regime, which means that smaller projects may face less stringent regulations, promoting the benefits of DLT to both issuers and investors.6.So far, only two projects have been approved under the DLT Pilot Regime, both operating on blockchain technology, and the regulators aim to extend the duration and clarify the exit process of the DLT Pilot Regime to encourage more robust pilot projects and integrations.

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