EU Rules for Distributed Ledger Financial Trading Finalized Ahead of March Pilot

Requirements to test people's knowledge of distributed technology could deter the average retail investor, some worry.

AccessTimeIconDec 16, 2022 at 9:46 a.m. UTC
Updated Dec 16, 2022 at 3:28 p.m. UTC

European Union (EU) regulators have set out how to apply to run a financial market based on distributed ledger technology (DLT) – clearing the way for a new pilot regime to start next March.

Lawmakers in the bloc reckon the technology underpinning crypto could cut out middlemen when trading financial instruments such as stocks, bonds and other securities, but there have been concerns about whether regular retail investors will be able to access the benefits in practice, especially as they’ll need to take a test first.

When users of the platform are regular people, rather than, say, an investment bank, “the applicant should clearly indicate to the [national competent authority] for its assessment what are the experiences (e.g., through its education, training, professional experience, etc.) which demonstrate a sufficient level of knowledge of the functioning of the DLT technology,” said the guidance, published Thursday, referring to distributed ledger technology.

There have been worries that hurdle could prove a deterrent to using DLT as opposed to existing ways of accessing financial markets, especially if each EU country does it differently, CoinDesk has been previously told.

The guidance from the European Securities and Markets Authority (ESMA) isn’t binding, but national authorities will need to explain any decision not to follow it. Though they take effect in March, alongside the rest of the rule changes, “applicants are strongly encouraged to anticipate the formal entry into force of the guidelines,” ESMA said.

In principle, the new regime is open to existing markets and new entrants. Comments on the draft were received from companies representing investment firms, trading venues, and securities depositories, ESMA said.


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Jack Schickler

Jack Schickler was a CoinDesk reporter focused on crypto regulations, based in Brussels, Belgium. He doesn’t own any crypto.