What Is the EU’s DLT Pilot Regime?
The DLT Pilot Regime, formally Regulation (EU) 2022/858, is a temporary framework that allows market infrastructures to trade and settle financial instruments recorded on distributed ledger technology under targeted exemptions from several pillars of EU financial law, including MiFID II, MiFIR, the Central Securities Depositories Regulation, and the Settlement Finality Directive. It has applied since 23 March 2023, and it exists because tokenising a share or a bond in a way that is legally enforceable across the EU requires satisfying rules that were written decades before distributed ledgers existed, rules around trade reporting, settlement finality, and central securities depository functions that assume a specific, non-DLT market structure. Rather than rewriting that entire body of law upfront, the EU chose to run a supervised pilot, gathering real operational experience before deciding whether and how to make the exemptions permanent.
Three Types of DLT Market Infrastructure
The regulation creates three categories of permission. A DLT multilateral trading facility, a DLT MTF, is operated by an investment firm or market operator and admits only DLT financial instruments to trading. A DLT settlement system, operated by a central securities depository, settles transactions specifically in DLT instruments. A DLT trading and settlement system combines both functions in a single entity. Firms already authorised as an investment firm, market operator, or CSD can apply directly for one of these permissions; firms that are not yet authorised in one of those capacities must apply for that underlying authorisation simultaneously, with the possibility of exemptions from some of its usual requirements if they operate specifically under the pilot regime.
Figure 1. Operators need existing MiFID or CSD authorisation, or must apply for it alongside the pilot permission.
Size Limits That Keep It a Pilot
To keep the experiment contained, the regulation caps the size of instruments that can be admitted. Shares admitted to a DLT market infrastructure must have a market capitalisation, or tentative market capitalisation for new issuances, below €500 million, with comparable caps applied to bonds, other securitised debt, and money market instruments. The regime itself runs for three years from its start date, after which the European Securities and Markets Authority, ESMA, reports to the European Parliament and the Council on how the pilot has functioned, informing any decision on whether to convert some or all of these exemptions into permanent law. As of ESMA’s most recent reporting, adoption has been modest, a small number of DLT market infrastructures had received specific permission by mid-2025, reflecting both the genuine caution firms are exercising and the narrow size ceiling the pilot imposes.
Figure 2. Instruments must stay below these caps, or the exemptions granted under the pilot no longer apply.
How the Exemption Process Actually Works
A firm wanting to operate under the pilot applies to its national competent authority, which can grant specific, targeted exemptions from the named directives and regulations based on what the applicant’s DLT infrastructure actually needs relief from. ESMA coordinates across national authorities to build a shared supervisory approach, publishes the running list of authorised DLT MTFs, settlement systems, and combined systems on its website, and monitors implementation ahead of its formal report to the Commission. This is a materially lighter-touch process than a full legislative carve-out, but it is not a blanket exemption: each permission is scoped to the specific relief the applicant demonstrated it needed, and the underlying investor protection, market integrity, and financial stability requirements of EU law remain in force throughout.
Figure 3. The exemptions are specific and temporary, not a blanket carve-out from EU financial law.
Why This Matters for Institutional RWA Activity
The DLT Pilot Regime is the specific legal mechanism that lets a tokenised bond or a tokenised money market fund share actually trade and settle on a distributed ledger within the EU’s regulated market, distinct from MiCA, which governs crypto-assets that are not already financial instruments under MiFID II. A tokenised government bond is a financial instrument first, and the Pilot Regime is what lets its DLT-based trading venue operate lawfully; understanding this distinction is essential for anyone assessing whether a given tokenised RWA product needs a MiCA white paper, a DLT Pilot Regime exemption, or, in some structures, both.
The Pilot Regime is the EU testing, deliberately and under supervision, whether tokenised markets can meet the same bar traditional markets already have to clear.
Related reading on Blockchain People
What Is MiCA? · What Is a Crypto-Asset White Paper Under MiCA? · Blockchain People Glossary
External References
Regulation (EU) 2022/858 on a Pilot Regime for DLT Market Infrastructures (EUR-Lex) · ESMA DLT Pilot Regime Overview (ESMA)
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