The French Autorité des Marché Financiers (AMF) and the Italian Commissione Nazionale per le Società e la Borsa (CONSAB), have joined to submit recommendations to the Europea Commission pertaining to the usage of blockchain or distributed ledger technology (DLT).
The AMF shares that the European Regulation on a Pilot Regime for market infrastructures based on DLT has struggled to gain traction. Enacted in 2023, the policy has failed its goal to benefit from improved trading, settlement and custody via blockchain technology.
“At a time when Europe wishes to develop its financial markets to meet its financing needs with the Savings and Investment Union, it is clearly a priority that Europe puts in place a competitive framework to encourage innovation, and market testing of distributed ledger technology, in order to better measure the potential benefits” stated Marie-Anne Barbat-Layani, AMF Chair and Paolo Savona, CONSOB Chair.
The AMF and CONSAB have submitted the following to improve the Pilot:
A more flexible regulatory framework to encourage experimentation
The Pilot Regime must play a more important role in allowing DLT experimentations, providing greater flexibility to market participants. To achieve this, it is essential to introduce greater proportionality, based on the size and nature of the project. At the same time, strengthening the role of ESMA will ensure consistency and convergence of practices across the European Union. Moreover, the use of electronic money tokens and tokenised deposits for transactions settlement could be authorised more widely, while supporting the rapid implementation of a solution for safe and efficient centralised money settlement of financial assets issued through DLT.
Broaden the scope and ensure long-term visibility
To make the Regime more competitive, in particular compared to the regulatory frameworks in other financial centres, the eligibility and capitalisation limits for infrastructures could be raised to allow testing of larger-scale projects, while granting ESMA with powers to review such limits to more timely adapt to market developments. In addition, the list of eligible assets could be extended to include more diversified financial products, such as structured bonds and some derivatives. Lastly, extending the duration of the Pilot Regime and clarifying the exit process is necessary to allow the level of investment needed to develop long-term projects, by offering greater visibility to the investors.
Developing interoperability and raising market awareness
To successfully integrate DLT technology into the European financial sector, gateways need to be built between DLT infrastructure and traditional systems. Therefore, the definition of common standards at European level is a crucial step to ensure the interoperability of systems between the different market participants and simplify processes for all stakeholders. Finally, it is important to raise awareness among issuers and investors of the opportunities offered by listing financial assets on DLT, in order to promote the adoption of this technology by all stakeholders.
