Distributed ledger technology: member states endorse agreement reached with European Parliament

EU Council | Dec 22, 2021

EU ambassadors yesterday 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.

See:  Europe agrees on regulation of distributed ledger technology pilot regime

Andrej Šircelj, Minister of Finance of Slovenia yesterday said:

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.

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.

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