On 2 June 2022, the European Regulation on a pilot regime for market infrastructures based on blockchain technology was published in the Official Journal of the European Union. It introduces a harmonized and attractive regulatory framework for activities on security tokens. It will apply from 23 March 2023. It is essential that market players with projects involving tokenization of financial instruments anticipate to fully understand this reform and leverage on the opportunities it offers as soon as possible.
On 2 June 2022, the European Regulation 2022/858 on a pilot regime for market infrastructures based on distributed ledger technology (the "Pilot Regime Regulation") was published in the Official Journal of the European Union.
Proposed by the European Commission in the Digital Finance Package announced in September 2020, this new regulation applies to market infrastructures wishing to develop financial activities based on the blockchain technology, i.e. possibly the operators of a multilateral trading facility and/or a settlement system for transactions in financial instruments.
This Pilot Regime Regulation allows them to be exempted from certain specific requirements that would normally apply under the current regulatory framework, and thus to be authorized to develop certain activities using blockchain. The exemptions provided for by this regulation will be granted by the national authorities under conditions, in particular, regarding the volume of activities depending on the nature of the financial instruments involved, and for a period of up to six years.
The Pilot Regime Regulation will apply from 23 March 2023. Discussions have started at the national and European levels, in particular within the European Securities and Markets Authority ("ESMA"), regarding technical regulations needed to implement this reform.
The objective of the Pilot Regime Regulation is to position the European Union as an attractive jurisdiction for financial activities in blockchain, with a new framework for projects of "tokenization" of financial instruments (security tokens).
Considering the strategic challenges that this reform addresses, it is essential that market players anticipate and understand this new regulatory framework in order to fully leverage the opportunities it offers as soon as possible.
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