ESMA Offers Guidelines For Participating Companies To Tokenized Securities Pilot

The European Securities and Markets Authority (ESMA) is putting out criteria to prepare market players for operating in a tokenized securities sandbox.

To develop the rules, ESMA collaborated with ten financial firms, trading venues, and central securities depositories. While they are not required, participants are highly encouraged to adhere to them.

The recommendations will go into effect on March 23, according to ESMA, coinciding with the debut of the sandbox.

In order to participate in the sandbox, ESMA recommends that applicants give a criminal record for laws relating to the financial sector, securities, or payments, as well as money laundering and terrorism funding, fraud, financial crime, bankruptcy, or insolvency. Personal indebtedness or bankruptcy would also impact the good reputation necessary to participate.

Experience in the industry is also required. The EU institutions’ legislation on the DLT Pilot Regime already provides that participants must have the capacity, competence, expertise, and understanding of the technology.

In March, the EU will begin a pilot program for market participants to experiment with financial products based on decentralized ledger technology (DLT).

The DLT Pilot is part of the EU’s Digital Finance program for 2020. The EU’s groundbreaking Markets in Crypto-Assets (MiCA) law, slated to take effect in 2024, falls into the same legal category.

The DLT Pilot Regime will allow both conventional financial institutions and innovators, such as crypto companies, to employ decentralized technology to create an innovative market architecture that interests middlemen. The initiative will be overseen by the ESMA.

DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.

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