DLT Pilot Regime Overview

Regulations enacted in March 2023 enable firms to test the use of blockchain technology within the capital markets using a regulatory sandbox known as the EU’s DLT pilot regime. Under Regulation (EU) 2022/858, companies have an opportunity to experiment with tokenized securities while being exempt from numerous traditional regulation requirements.

The DLT pilot regime covers the areas of trading and settlement. As a result of these regulations, companies will have an opportunity to develop their business models using tokenized securities while ensuring stable trading and settlement methods are adopted. Discussions appear to be leaning towards extending the use of these regulations through at least 2026 based on increasing trends towards tokenization.

This roadmap timeline shows key milestones from the EU Digital Finance Package in 2020 to assessments in 2026. Image source: Mondaq.

Core Elements of the Regime

The three types of DLT infrastructures that fall under the regime are Multilateral Trading Facilities (MTFs), Settlement Systems (SSs), and Trading-Settlement Systems (TSSs). Obtaining permission from the relevant National Authority is required for all participants, and MTFs must impose certain limits, such as no more than €6 million in share-related transactions or no more than €9 million in bond transactions, in order to limit potential risks for participants during the experimental phase.

The proposed DLT will support the ability for participants to experience "real world" scenarios associated with the issuance, trading, and settlement of Financial Instruments; however, it will require that each Participant adopt appropriate risk management practices, as well as adequate reporting. Participants are entitled to request a waiver from a CSDR/MiFID II regulation if the DLT will provide a more efficient means of settlement i.e., instantaneous Settlements.9 To date, there have only been a few pilot projects initiated, which focused primarily on bonds and funds.

Recent Proposals and Changes

ESMA proposed extending the ESG framework indefinitely in June 2025 with a higher threshold than currently available to allow more assets under the ESG umbrella, and proposed a broad range of covered assets. The European Commission proposed a simplified track for companies with assets less than EUR 10 million in advance of implementing the Market Integration Package by the end of 2025; these initiatives are expected to support further integration and proportionality in market access.

The European Central Bank announced their acceptance of DLT-based assets as Eurosystem collateral in January 2026, representing significant progress toward full integration. These initiatives demonstrate that Europe is committed to leading the world in providing core infrastructure for tokenisation by converting pilot projects to full operational support through the Market Integration Package and will allow wider access to financial markets throughout Europe.

This diagram depicts the DLT Ecosystem for Crypto Securities, showing how Issuers, Investors & Platforms are connected to each other - Cashlink

Market Implications And Future Outlook

This regime could potentially transform capital markets by reducing costs and increasing transaction speeds; however, challenges such as interoperability will still exist. In addition, it provides a way for firms to enter the blockchain space with low risk and may even lead to new market players if it is made permanent. Various regulators will conduct an evaluation of the DLT on an ongoing basis, with an expected report out in 2026.

Ultimately, this ongoing process allows the EU to become a centre for tokenization activities, where there will be a balance between experimentation and regulation, which can be accessed through their website for more information on how to apply.

EU DLT Pilot Regime: Overview and 2026 Updates