Tokenization and pilot scheme: French regulators set the pace

The pilot scheme is operational for three years and allows to operate DLT market infrastructure projects. The actors of the finance must present their files at regulators which, in Francespecify the rules.

It’s a new playing field for financial providers. A European regulation of May 2022 opens up new opportunities for them. Indeed, the pilot regime for market infrastructures based on the distributed ledger technology defines a framework for experimentation for a period of three years – renewable.

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Since March 23, the kick-off has been given with the entry into force of the regulation. Its interest for finance: to allow the issue, recording, transfer and storage offinancial instruments DLT so-called “tokenized”, i.e. in the form of digital tokens.

Tokenization of stocks, bonds and mutual fund shares

The pilot scheme brings together under certain conditions and ceilings tokenized financial instruments (stocks, bonds and units of UCITS),” said the Autorité des marchés financiers, AMF, one of the regulators involved in the application of the pilot scheme.

The pilot regime is certainly intended to allow “innovation and experimentation within a regulatory framework,” but not without rules. The European regulation creates three new categories of DLT market infrastructures.

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Multilateral Trading Facility DLT (MTF DLT), Settlement Facility DLT (SR DLT ), and finally Trading and Settlement Facility DLT (SNR DLT), each with a specific authorization procedure.

The counters are open to the AMF and the ACPR

Derogations and exemptions are possible. However, they must be applied for within the framework of a procedure that begins with the filing of a file with the authorities (ACPR or AMF, depending on the case, with the possible opinion of the Banque de France).

The three authorities have specified this week the conditions of investigation of the files. Investment firms, credit institutions providing investment services and credit and investment institutions are now dealing with the Fintech Innovation Unit of the ACPR.

It should be noted that the pilot scheme is intended for companies holding a approval. Therefore, applicants who do not already have a license, for example as an investment services provider, must apply for it in parallel.

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