DLT, MiFID, and the EU’s Cautious Experiment with Tokenised Markets

Distributed Ledger Technology (DLT) is often framed as a disruptive force for capital markets. In practice, it is better understood as an infrastructure shift: a way to record, transfer and settle financial instruments on a shared ledger rather than through fragmented intermediaries. In capital markets, this enables “tokenisation”, understood as the digital representation of shares, bonds or fund units, while preserving their legal nature.

In the EU, the DLT Pilot Regime (Regulation (EU) 2022/858) became applicable in March 2023. This created a regulatory sandbox allowing firms to issue, trade and settle tokenised securities within controlled thresholds.

The regime introduced three new types of infrastructure:

• DLT Multilateral Trading Facilities (DLT MTF) – available for authorised investment firms and market operators
• DLT Settlement Systems (DLT SS) – available for authorised central securities depositories
• DLT Trading and Settlement Systems (DLT TSS) – available for both of the above

These infrastructures can benefit from temporary exemptions from existing rules, where those rules are incompatible with DLT-based operations.

MiFID Still Governs the Substance, Not the Technology

MiFID II remains the anchor framework. If a token qualifies as a financial instrument under MiFID, it is regulated as such, regardless of how it is issued.

The DLT Pilot Regime does not change this classification, but it operates as a technical overlay, enabling market infrastructures to experiment with new ways of running markets while preserving investor protection and market integrity.

3 Years In, Who Is Actually Using the Regime, and What Changed

Despite the ambition, uptake has been limited, with only a handful of licences granted and even fewer active infrastructures. Examples include 21X (Germany), the first DLT trading and settlement system authorised; Axiology (Lithuania) and Securitize Europe (Spain) – both authorised DLT TSS operators.

Latest proposals from the EU would expand the scope of applicable law: all financial instruments would be eligible, existing caps would be removed, and time-limits on permissions to operate would be removed, to encourage developments.

Where the Opportunity Sits

Each DLT licence represents a different strategic position:

• DLT MTF (trading layer) would allow building trading venues for tokenised assets, assuming liquidity can be warranted.
• DLT SS (settlement layer) can redesign post-trade infrastructure, in terms of custody, clearing, settlement, to the extent there are financing options allowing for discharge
• DLT TSS (vertical integration between trading and settlement) are arguably the most disruptive model, if the regulatory and operational complexity can be tackled.

The DLT Experiment Essentially

The DLT Pilot Regime is, ultimately, a regulatory experiment.

Its value lies less in immediate adoption and more in what it reveals: that the future of capital markets in Europe will be determined by technology as much as by how far regulators are willing to adapt the legal infrastructure around it.