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Regulation (EU) 2022/858 of the European Parliament and of the Council of 30 May 2022 on a pilot regime for market infrastructures based on distributed ledger technology (the “Regulation”) creates a regime in which market infrastructures can obtain exemptions from applicable financial regulations in order to be able to use distributed ledger technology (DLT) for the trading and settlement of securities transactions, thereby promoting the development of DLT in the financial sector while guaranteeing a high level of investor protection and transparency as well as preserving market integrity and financial stability.
The Regulation introduces three new types of DLT market infrastructures:
The Regulation allows these DLT market infrastructures to benefit from certain exemptions from the legal obligations applied under MiFID II/MiFIR and CSDR, obligations deemed too restrictive to allow authorised financial market infrastructures using DLT to provide trading services or securities settlement, or a combination of these services, on financial instruments.
It should be noted that the pilot regime applies to DLT financial instruments, i.e. financial instruments within the meaning of MiFID II, which are issued, recorded, transferred and stored using distributed ledger technology.
The Regulation applies from 23 March 2023. In Luxembourg, the Regulation is implemented by the Law of 15 March 2023. This law further modifies the definition of financial instruments of the Law of 5 April 1993 on the financial sector (LFS) and the Law of 30 May 2018 on markets in financial instruments (MiFID II law), clarifying that this concept includes financial instruments issued using distributed ledger technology.
The initiator of a project, that is at an early stage of its development, has the possibility of contacting the Innovation Hub in order to obtain not only regulatory guidance, but also the possibility of discussing the legal qualification and technology aspects of the project in preparation for submitting a potential application file. To arrange an exchange or a meeting with the Innovation Hub, simply fill in the contact form and send it to firstname.lastname@example.org.
Given that the procedure for reviewing application files is subject to strict conditions, particularly in terms of deadlines, the initiator of a project, that is at an advanced stage of development (where the project initiator has not been in contact with the Innovation Hub who would have then transmitted the compiled file to the teams in charge), can directly contact the teams in charge of reviewing application requests via the address email@example.com to organise an exchange or a meeting in order to present their project. The CSSF will then communicate, on request, a secure link to transmit the finalised application request and the related documents (“the application file”), electronically.
It should be noted that any request for specific permissions to operate a DLT market infrastructure must be based on the standard forms, formats and templates published in the ESMA Guidelines relating to this subject, published on 8 March 2023 and attached to Circular CSSF 23/832.
Application requests and any related communication may be made in French, German or English. Given the involvement of ESMA and possibly other authorities concerned in the process of assessing application files and the tight legal deadlines, the CSSF recommends the use of the English language widely used in the financial sector.