What is the DLT Pilot Regime and who is actually using it?

The exemptions it grants, the volume caps it imposes, and what it was built to prove.

The DLT Pilot Regime lets market infrastructures trade and settle tokenized financial instruments under temporary exemptions from CSDR and MiFID II, subject to volume caps. It was built to test whether existing rules obstruct DLT market structure. Uptake has been low. The European Commission proposed a significant upgrade in 2026.

What is the EU DLT Pilot Regime?

It is Regulation (EU) 2022/858, in application since 23 March 2023. It allows market infrastructures to trade and settle tokenized financial instruments while being exempted from specified requirements in MiFID II and CSDR that assume a central securities depository and conventional book-entry form. Permissions are granted by national competent authorities for up to six years and are valid only for the life of the regime.

It exists because the securities rulebook predates ledgers. CSDR requires book-entry form and central registration; MiFID II separates trading from settlement. A ledger-native infrastructure can perform both in one system, which the standing framework does not contemplate. Rather than rewrite the rulebook first, the EU created a bounded regime granting targeted exemptions and generating evidence.

Three permissions exist. A DLT multilateral trading facility, operated by an authorised investment firm or market operator, admitting only DLT financial instruments. A DLT settlement system, operated by an authorised central securities depository. And a DLT trading and settlement system combining both functions in one entity — the regime’s innovation, because no conventional equivalent exists.

New entrants are contemplated: a firm without an existing licence may apply for a temporary investment firm, market operator or CSD authorisation alongside its pilot-regime application. That is how the first authorised operators arrived, and it is slow — the first DLT trading and settlement system took around eighteen months of engagement with its national authority, the national central bank, ESMA and the ECB.

Which exemptions does it grant?

Exemptions are granted per operator, on request, only where a named requirement is incompatible with the DLT use case, and each comes with conditions attached. They are also published: the ESMA register of authorised DLT market infrastructures lists, for each permission, exactly which articles were disapplied. That register is the most precise statement of what the regime does in practice.

Two of those matter most commercially. Direct retail access removes an intermediary layer that conventional market structure requires. Settlement in commercial bank money is what makes an on-ledger cash leg feasible at all, since central bank money on a ledger remains largely experimental.

The exemption lists granted so far differ materially between operators, which is worth reading rather than assuming. One permission disapplies a short list of settlement-discipline and segregation provisions; another spans CSDR definitions and core articles plus MiFID II access provisions. Permissions are bespoke, not standard.

What volume caps does it impose?

Caps apply both per instrument and per infrastructure, and national authorities may set lower thresholds still. They are the reason the regime is described as a sandbox rather than a regime: an operator that succeeds runs into a ceiling by design.

The transition strategy is a condition of permission rather than an afterthought. An operator must set out in advance how it would migrate or wind down its activity if the caps are exceeded or the permission ends, and that plan is assessed as part of the application.

For an issuer the practical read is that the caps rarely bind on a first issuance and always bind on a business plan. For an infrastructure operator, they are the central commercial question, and they are what the 2026 reform debate is really about.

What was it built to prove?

Whether the existing rulebook obstructs DLT market structure, and if so, precisely which provisions. The regime is an evidence-gathering exercise with a legislative purpose: exemptions granted case by case, conditions attached, outcomes reported to ESMA and the Commission, and a decision at the end about which elements should become permanent law.

Three specific questions sat behind it. Can trading and settlement be combined safely in one entity, which conventional market structure separates for good reasons? Can retail investors access a market infrastructure directly without the protections an intermediary chain provides? And can settlement in commercial bank money be made safe enough to substitute for central bank money in this context?

The regime also had an institutional purpose: to give supervisors direct operational experience rather than theory. National authorities, national central banks, ESMA and the ECB have all been involved in the first authorisations, and that shared learning is part of the output.

ESMA’s report on the functioning and review of the regime is candid that the limited number of operational infrastructures and the recency of the first authorisations mean its considerations remain early and high-level. That is an unusual admission from a supervisor and the most reliable summary available: the regime has not failed, and it has not yet been tested at scale.

Who is actually using it today?

Three infrastructures across the whole Union, as recorded on the ESMA register. Everything else in this area is either an announcement, an application, or a national initiative outside the regime.

Operationally, 21X states that it opened its venue fully on 8 September 2025, offering smart-contract based issuance, trading and atomic settlement of tokenized stocks, bonds and funds, with regulated institutions joining as listing sponsors during 2026. That makes it the first EU venue where the trading-and-settlement combination the regime was written for is actually running.

Several national authorities publish guidance for prospective applicants without having granted a permission yet, including the CSSF in Luxembourg, the AFM in the Netherlands and the AMF in France. Reading that guidance is the cheapest way to understand what an application involves in a given market.

This section is maintained. Where a new permission appears on the ESMA register it is added here with its date, authority and granted exemptions at the next monthly review. If you know of a permission not listed, write to info@cosimodigital.com with the register reference.

Why has uptake been so low?

Because the regime asks for a full market-infrastructure authorisation in exchange for time-limited exemptions and capped volumes. A firm must satisfy a national competent authority, in practice also ESMA and the ECB, then operate under ceilings, then plan for the permission ending. For most business cases the effort exceeds the benefit.

• Time limit. Six years, with no guarantee the regime becomes permanent, is a difficult horizon for infrastructure investment.
• Volume caps. They constrain exactly the instruments an operator would most want to scale.
• Eligible entities. The regime excluded some of the firms with the deepest DLT experience, notably MiCA-authorised CASPs and OTF operators.
• Cash leg. Commercial bank money settlement is permitted and still difficult to arrange in practice.
• Process cost. Eighteen months of multi-authority engagement is a substantial commitment before revenue.

There is also a demand-side reason that is rarely stated. Primary issuance of tokenized securities in Europe does not require the pilot regime at all, and secondary demand has been thin, so the marginal value of a venue permission has been low. Operators were not avoiding a burden so much as waiting for a market.

The honest read for an issuer today: the regime is more relevant to infrastructure operators than to issuers. It matters when you need a venue and on-ledger settlement, which is a smaller set of cases than the discussion around it suggests.

What is in the Commission’s 2026 upgrade proposal?

The Commission has proposed reforming the regime to widen who may operate a DLT infrastructure. The change most reported by practitioners is the addition of MiCA-authorised crypto-asset service providers, and operators of organised trading facilities, to the entities eligible to apply for permission to run a DLT trading venue or a DLT trading and settlement system.

The reasoning is proportionality. CASPs authorised under MiCA are among the entities with the longest experience of dealing with DLT and digital assets, and the Commission does not regard their exclusion from a technology-focused sandbox as proportionate. OTF operators are subject to an equivalent authorisation regime and to equivalent organisational, conduct and transparency requirements as MTF operators under MiFID II and MiFIR, so their exclusion lacks a clear justification. Newly eligible entities would still have to satisfy the relevant MiFID II, MiFIR and, where applicable, CSDR requirements.

The reform sits alongside two other processes. ESMA was mandated to report on the results of the regime by March 2026, following its Article 14 report. And the Commission’s market integration package reopens UCITS, AIFMD, MiFID and MiFIR, EMIR, CSDR and the cross-border fund distribution rules, with tokenisation among the topics in scope.

What is not yet decided: whether volume caps are raised, whether the regime’s duration is extended or elements made permanent, and how settlement in central bank money is ultimately handled. Those three determine whether the regime becomes commercially interesting. Anyone presenting the outcome as settled is ahead of the legislative process. Read the dated regulation tracker, the EU regulatory stack, or why the cash leg is the hard part.