THE DLT SANDBOX UNDER THE EU PILOT REGULATION

The European Commission published its new Digital Finance Strategy on 24 September 2020 (DFS 2020). One of the centerpieces is draft regulation a pilot regime for market infrastructures based distributed ledger technology (known as PilotR). The PilotR Proposal foresees regulatory sandbox approach Single Market, offering firms set exemptions from EU financial law allowing them to test technologies (DLTs) in certain activities related trading, clearing, and settlement. Besides room experiment, supports education regulators about DLTs this context, which may come form basis foundational changes law. The constitutes significant step towards future-proof fintech framework. We appreciate scale PilotR, with an ‘EU Passport’ ongoing cooperation across competent authorities ESMA. characterized by innovative ‘Business Plan Approach’ where DLT operator defines governance functions liabilities entities operating, connected to, DLT. Through Business Approach, promotes innovation while demanding business-specific risk mitigation, avoiding one-size-fits-all approaches. This bold move, however, prompts legal questions regarding enforceability business-induced rules vis-a-vis nodes that do not qualify operators well third parties. Furthermore, would benefit three amendments: First, legislators should articulate clear link between priorities laid down DFS along explanation how fits into broader measures support innovation. Second, narrow scope relatively long timeline testing, thereby degree mutual learning will be reduced. Third, being limited authorized MiFID CSDs only, leniency reserved incumbents only – despite PilotR’s expressed objective start-ups.