EU DLT Pilot Regime: Testing Tokenized Securities Infrastructure

Overview: The DLT Pilot Regime

The Regulation on a pilot regime for market infrastructures based on distributed ledger technology (EU Regulation 2022/858) was adopted on 30 May 2022 and became applicable from 23 March 2023. The Regulation creates a framework under which trading venues and central securities depositories (CSDs) can apply to operate DLT-based market infrastructure with specific exemptions from the requirements of MiFID II, MiFIR, and the Central Securities Depositories Regulation (CSDR) that would otherwise prevent DLT-based settlement.

The DLT Pilot Regime is a regulatory sandbox at infrastructure level — not a license for individual issuances. It allows infrastructure operators to test DLT-based systems for securities trading and settlement under controlled conditions, with ESMA oversight and a built-in sunset clause requiring transition to permanent regulatory frameworks (or shutdown) by March 2029.

Permitted Infrastructure Types

The Regulation defines three types of DLT market infrastructure that can operate under the Pilot Regime:

DLT Multilateral Trading Facility (DLT MTF): A multilateral trading facility for DLT financial instruments, permitted to admit retail clients (not just professional investors) and to record ownership of DLT financial instruments — an activity normally reserved for CSDs.

DLT Settlement System (DLT SS): A settlement system for DLT financial instruments operated by a CSD or CSD-equivalent, permitted to provide exchange and trading services on the DLT platform — an activity normally reserved for trading venues.

DLT Trading and Settlement System (DLT TSS): A combination of DLT MTF and DLT SS functions in a single system — the DLT equivalent of the Swiss DLTF license, permitting atomic trading-and-settlement in a single integrated platform.

The DLT TSS is the most innovative category: it enables atomic DvP settlement on DLT infrastructure without requiring settlement participants to route through a separate CSD, mirroring the operational model of SDX’s DLTF.

Thresholds and Limitations

The DLT Pilot Regime imposes aggregate threshold limits on the DLT financial instruments admitted to each infrastructure:

• Aggregate market value cap: EUR 6 billion for DLT financial instruments admitted to a DLT MTF or DLT SS. Where the aggregate value approaches EUR 6 billion, the operator must notify the competent authority and ESMA.
• Individual instrument types: Only financial instruments that are shares (market capitalization < EUR 200 million), bonds (issuance size < EUR 1 billion), and units in UCITS are initially eligible for admission.

These thresholds are deliberately conservative — the Regulation is designed to test DLT infrastructure at manageable scale before enabling systemic adoption. The EUR 6 billion cap means that a single DLT pilot system cannot grow to systemic importance during the pilot period, limiting regulatory risk from infrastructure failure.

Exemptions Granted

Operators of DLT market infrastructure under the Pilot Regime receive specific exemptions from provisions of MiFID II, MiFIR, and CSDR that conflict with DLT operational models. Key exemptions include:

• Exemption from dematerialization requirements: Instruments admitted to DLT market infrastructure need not be dematerialized in a conventional CSD — the DLT record serves as the equivalent.
• Exemption from segregation requirements at CSD level: Traditional settlement requires strict segregation between a CSD’s own assets and client assets. DLT systems using smart contracts with automatic enforcement of beneficial ownership records may be exempted from some CSD segregation requirements.
• Admission of retail clients to DLT MTF: Conventional MTFs are restricted to professional clients; DLT MTFs can admit retail clients subject to enhanced investor protection measures.

Applications and Uptake

As of early 2026, several entities have applied for or received DLT Pilot Regime authorization:

Euroclear Bank (Belgium): Europe’s largest ICSD has applied for DLT SS status to test DLT-based settlement for digital bonds within the Euroclear system.

Boerse Stuttgart Digital Exchange (BSDEX): Germany’s Boerse Stuttgart has applied for DLT MTF authorization for its digital securities trading platform, which currently operates under German law exemptions for electronic securities.

SIX Digital Exchange (SDX): While SDX operates primarily under Swiss DLTF law, it has engaged with the Pilot Regime as a potential pathway for accessing EU-resident investors through a DLT-enabled EU entity.

Société Générale — Forge (SG-FORGE): SG-FORGE has piloted digital bond issuances under French law (Ordinance 2017-1674 on DLT securities) and is evaluating the Pilot Regime as a framework for scaling EU distribution.

Relationship to Permanent MiCA/CSDR Framework

The DLT Pilot Regime is explicitly temporary — designed to generate the regulatory learning and market evidence needed for the European Commission to propose permanent legislative amendments to MiFID II and CSDR by March 2026, with permanent frameworks operational by March 2029.

The Commission’s mandated review will assess: whether DLT-based settlement reduces systemic risk compared to conventional CSDs, whether the thresholds and eligible instrument types should be expanded, and what permanent regulatory changes are needed to accommodate DLT market infrastructure at scale.

For compliance officers, this means the DLT Pilot Regime is not a permanent compliance framework — businesses building on Pilot Regime authorizations must plan for transition to the permanent framework. The transition risk is mitigated by the Commission’s stated commitment to providing a permanent pathway, but the specific requirements of that pathway are not yet determined.

Key References

• ESMA — DLT Pilot Regime
• MiCA Regulation Overview
• ESMA Regulator Profile
• EU Jurisdiction Profile
• SDX Platform Profile