Rückblick auf Stellungnahmen der DAAA | 11.01.2021
Proposal for a regulation on markets in crypto assets
Proposal for a pilot regime for market infrastructures base on distributed ledger technology
Dear Sir or Madam,
The Digital Asset Association Austria (“DAAA”) would like to thank the European Commission for the publication of its Digital finance package and the chance to provide feedback. Please find our feedback below.
Proposal for a regulation on markets in crypto-assets
I. General Remarks
The DAAA welcomes the EU-Commissions timely initiative to establish a fully harmonized European regulatory framework for crypto-assets. We believe that legal certainty and ensuring equal standards and rules across the entire Union will benefit investors and the industry alike. The creation of a proportionate regulatory framework for crypto-assets and crypto-asset service providers is a necessary step to reduce regulatory arbitrage and to ensure adequate protection of the legitimate interests of investors, firms, and the public.
The EU is well positioned to lead by example and establish fair and practical rules for a true single European market in crypto-assets that safeguard consumer/investor interests and financial stability while at the same time embracing and fostering the innovative potential of the DLT. This will bring opportunities to a new generation of European investors and companies and boost the development of an innovative and globally competitive EU crypto-industry.
The Commission’s draft is a welcome first step, as it broadly ensures legal certainty, consumer protection, good governance and enables firms to offer and Citizens to benefit from services across the entire EU through a single license and passporting regime. However, some questions remain, particularly in relation to the adequacy and operational feasibility of certain requirements as well as the interlinkages with other existing financial services legislation, which we would like to highlight below.
II. Crypto-Asset Taxonomy
Article 3 (1) no. 2
“‘Crypto-asset’ means a digital representation of value or rights which may be transferred and stored electronically, using distributed ledger technology or similar technology.”
While we acknowledge the need to provide wide definitions in order to be able to account for future developments in the crypto-industry, the current open definition of crypto-assets bears the risk of over-extending the application of MiCA to crypto-assets that are a digital representation of rights, in particular of usage rights, and thus akin to vouchers or other means to provide proof of right to gain access to products or services. Even if such crypto-assets are fungible (stored on a public DLT), their regulation under MiCA seems excessive.
We thus believe that MiCA should provide for a clearer distinction between tokens that qualify as assets (payment or investment function) and other tokens that primarily serve as means to legitimize the access to certain products or services and provide for an exemption of the latter. However, we acknowledge that there might be considerations regarding information deficits and a potential market abuse around crypto-assets legitimizing the access to certain products and services. Crypto-assets with investment function should be clearly delineated from financial instruments (see below).
Article 3 (1) no. 3
“‘asset-referenced token’ means a type of crypto-asset that purports to maintain a stable value by referring to the value of several fiat currencies that are legal tender, one or several commodities or one or several crypto-assets, or a combination of such assets.”
We welcome the explicit clarification that the digitization of existing financial instruments is out of scope and will be addressed by necessary amendments to MiFID II. We also generally welcome the proposed distinction between e-money tokens (EMTs), asset referenced tokens (ARTs) and other crypto-assets. However, the current definition of ARTs does not sufficiently draw the line between crypto-assets that qualify as ARTs under MiCA and crypto-assets that qualify as tokenized financial instruments. As mentioned above, we generally understand that the wide/open definitions currently proposed are intended to ensure future-proof legislation to the greatest possible extent; however, the current open definition of ARTs bears an inherent legal uncertainty regarding their ultimate delineation from financial instruments (in particular derivatives) pursuant to MiFID II — in particular as the latter vary across Member States. We believe that the criteria of “purports to maintain a stable value” alone is insufficient to avoid potential overlaps with existing national definitions of financial instruments. In the face of potentially conflicting interpretations by National Competent Authorities (NCA’s), a catalogue of criteria should be established, ideally within MiCA itself or otherwise on level-2, to provide for a clear distinction between these asset classes.
Given that the initial (non-)classification of a crypto-asset pursuant to MiCA is subject to the (home-)NCA’s assessment, any subsequent diverging interpretations of the same product by other NCAs should be subject to prior consultation with the home-NCAs and possibly with the involvement of the European Supervisory Authorities (ESAs). Any enforcement actions should be suspended for the time of pending consultations. Further interpretative level-3 guidance on the classification of (borderline) crypto-assets could be mandated to the ESAs to be able to respond to emerging developments and trends in the industry.
III. Other Provisions/Issues
Article 3 (1) no. 6, Article 4 (1) lit. a & Article 68 (1)
The current definition of “issuers of crypto-assets” contained in Article 3 and the scope of Article 4 are not sufficiently clear on whether crypto-assets that are not developed/created by a single issuer (decentralized finance, DeFi) are exempt from the application of Article 4. It should thus be clarified that developers/creators (and maintainers) of such crypto-assets do not qualify as issuers and are thus not subject to the requirements laid down in Title II.
In particular, the current wording of Article 4 (2) (b) is not sufficiently clear, as it refers to crypto-assets that are “automatically created”. However, the initial development of the protocol (creation) itself is not automated. Automation only applies in relation to the subsequent and perpetual mining of (additional) crypto-assets and maintenance of the network.
Consequently, it is also unclear whether Crypto-Asset Service Providers (CASP) are altogether barred from offering the exchange or admission to trading of crypto-assets that do not have a single issuer pursuant to Article 3 (1) (6).
Therefore, MiCA should provide for an explicit exemption of DeFi tokens, that do not have a single issuer, from the application of Title II and thus allow their admission to trading on MiCA regulated trading platforms (please see next issue below with respect to Article 68 (1) 2nd subpara).
In addition, to our understanding the current draft regulation always links the regulation of crypto assets to an “issuer of crypto-assets”. However, the probably most popular crypto-asset “Bitcoin” was not put into circulation by an issuer of crypto-assets within the meaning of the draft regulation. Bitcoin was rather developed by an up to this day unknown group of programmers and can be created “mined” by everyone. Crypto-assets that are put into circulation in this way and become (without being actively marketed in the European Union) due to its attractiveness highly in demand by consumers and investors seem to be currently not covered by this draft regulation.
Therefore, MiCA should provide further definitions and guidance about Bitcoin and similar crypto-assets and their applicability within the scope of MiCA.
However, we understand that an outright deregulation of DeFi tokens and other crypto-assets that are not put into circulation by an issuer is in the EU’s strategy. Therefore, we would suggest an explicit exemption for the time being and adapting existing regulations to be (more) accessible for DAOs.
Article 18 (4)
“The EBA, ESMA, the ECB and, where applicable, a central bank as referred to in paragraph 3 shall, within 2 months after having received the draft decision and the application file, issue a non-binding opinion on the application and transmit their non-binding opinions to the competent authority concerned. That competent authority shall duly consider those non-binding opinions and the observations and comments of the applicant issuer.”
Due to several steps and deadlines, the application process for issuers of asset-referenced tokens is expected to last for several months. A streamlining of the application process would benefit the industry and especially SMEs. In this light, the involvement of EBA, ESMA and ECB in the application process to issue non-binding opinions is not feasible. It significantly contributes to the duration of the application process.
We propose to limit this requirement to issue an opinion exclusively to issuers of a certain size in order to address this concern.
Article 68 (1) 2nd subpara
“For the purposes of point (a), the operating rules shall clearly state that a crypto-asset shall not be admitted to trading on the trading platform, where a crypto-asset white paper has been published, unless such a crypto-asset benefits from the exemption set out in Article 4 (2).”
The current wording suggests that CASPs may only admit crypto-assets to trading on their trading platform when a whitepaper has been notified. Given that this obligation applies to a specific issuer publicly offering his crypto-assets in the EU, this would arguably prohibit the trading of DeFi Tokens on regulated EU trading platforms. We consider an outright ban of the offering of crypto-assets by trading platforms, solely on the basis that an issuers has not notified (and published) a whitepaper to an NCA in the EU or instances where there is no single (incorporated) issuer, to be a disproportionate measure given that CASPs will additionally be required to have in place a due diligence and approval process for the admission of crypto-assets on their platform (including such that have been notified in the EU). Furthermore, we believe that a ban of non-notified crypto-assets from EU trading platforms would not effectively curb the sale to and purchase by EU-investors, as the latter would likely circumvent restrictions in the EU by resorting to less regulated crypto-exchanges and trading platforms from third countries.
Even though the proposed requirements for issuers in Title II set a relatively low barrier for the public offering of crypto-assets in the EU, it is not unlikely that issuers, particularly outside the EU, will simply choose not to (formally) offer their crypto-assets in the EU. This is especially relevant for crypto-assets that do not primarily serve as a means of financing of a particular project and where the issuers (or project members) do not have an incentive to formally notify in the EU. Many of the risks related to crypto-assets of issuers that do not formally notify within the EU could
be addressed by measures implemented by the CASPs. According to the proposal, CASPs are already obliged to perform a thorough due diligence and approval process, define corresponding exclusion categories and exclude from admission any crypto-assets that have inbuilt anonymization functions (Art 68 (1)). These measures would already prevent the admission to trading of crypto-assets that do not meet certain qualitative criteria, which also includes the reputation of the issuer, as well as mitigating specific concerns in relation to AML/CFT by banning crypto-assets with inbuilt anonymization functions. The fact that an issuer has not notified a whitepaper with an NCA in the EU could be subject to a mandatory warning on behalf of the offering CASP. Another possibility would be the notification of a whitepaper by the CASP, containing a minimum set of information on the project. The notification of this limited whitepaper by the CASP would obviously not substitute the notification by the issuer or transfer the obligations of Title II to the CASP but would merely serve to allow EU-CASPs to admit such crypto-assets on their trading platforms.
Article 68 (3)
“Crypto-asset service providers that are authorised for the operation of a trading platform for crypto-assets shall not deal on own account on the trading platform for crypto-assets they operate, even when they are authorised for the exchange of crypto-assets for fiat currency or for the exchange of crypto-assets for other crypto-assets.”
We fully understand and support the EC’s intention to mitigate the risks for investors/consumers in relation to own account dealing by operators of trading platforms and the potential conflicts of interest that may arises in these cases. However, we believe that an outright ban of all kinds of own account dealing on platforms, irrespective of the purpose of such transactions, would significantly impact CASPs that offer both exchange services as well as the operation of a trading platform. CASPs would be significantly impaired in their ability to efficiently hedge their positions assumed in relation to the buying/selling of crypto-assets to customers on own account on the exchange. Centralized CASPs would be forced to exclusively resort to third party exchanges and trading platforms, largely outside the EU, even in instances in which the purchase and sale of crypto-assets is exclusively performed for hedging purposes.
As mentioned above, we acknowledge the need to regulate and ultimately prohibit own account dealing to the extent that this would lead to operators of trading platforms effectively speculating against their own clients or engaging in market manipulation, whereby the latter is also addressed by specific provisions in MiCA. On the other hand, providing CASPs the possibility to deal on their own platform on own account to a limited extent and for specific purposes would in fact prove beneficial for CASPs and investors alike. Enabling own account dealing for hedging purposes would yield benefits in terms of ensuring the timely and cost-efficient execution of hedge transactions, thereby strengthening CASPs risk management. Moreover, market-making functions performed by operators of a trading platform, when adequately regulated, would also serve the interests of investors by providing additional liquidity on the platform. The latter is especially relevant in relation to small trading pairs, where external market makers are few and costly. Additionally, the requirement to cease or move own-account trading activities onto another platform would incur CASPs and ultimately investors significant cost. To comply with the
proposed limitations CASPs may in fact be forced to resort to source cryptos largely from third party providers outside the EU.
We therefore believe that an indiscriminate ban of all forms of own account dealing should only be considered as ultima ratio and dealing on own account should be possible for clearly stated purposes (incl. hedging) and within certain limits. Allowing centralized CASPs to hedge positions resulting from their role as counterparty on their exchanges, would enable the efficient and timely execution of orders, ultimately contributing to the overall reduction of their (market-)risk exposure and costs, and to the benefit of its customers.
Article 68 (8)
“Crypto-asset service providers that are authorised for the operation of a trading platform for crypto-assets shall complete the final settlement of a crypto-asset transaction on the DLT on the same date as the transactions has been executed on the trading platform.”
The majority of CASPs, including the industry’s largest players, are organized as centralized platforms offering several services, including purchase and sale, custody, and/or trading (platform) services in relation to crypto assets, and as such function as centralized intermediaries more akin to traditional brokerage or stock markets. Centralization serves i.a. to enhance efficiency, speed of execution, and provide for a seamless user experience. Before investors can transact on a centralized CASP, they generally must first open an account/wallet with the CASP. Investor’s then either deposit fiat money or send crypto assets via the DLT to a wallet (omnibus account) maintained (cold storage) and administered by the CASP. Investors’ wallets/accounts are then credited with the corresponding amount via an internal database entry. The crypto assets or fiat amount in a user’s wallet/account thus represents an IOU issued by the CASP. Users are thus not necessarily each assigned a wallet on the DLT. Users can then start trading crypto assets with other users on the trading platform. When two users transact with each other, only the internal database is (instantly) updated (credit/debit) and no DLT based settlement occurs on an individual user basis and for as long as the user decides to keep the purchased crypto-assets (claims) on the CASP. Once a user wants to transfer crypto assets from the CASP to an external wallet (e.g. at another CASP), this transaction is then settled via the DLT. For this purpose, the CASP withdraws the corresponding amount of crypto assets from the stock of crypto assets administered for all users in the (omnibus) wallet.
Centralization enables the efficient processing of orders at significantly lower costs, particularly in relation to small investment amounts. For example, average transaction fees for BTC in 2020 have ranged anywhere between 1 and 7 USD. A mandatory settlement on the DLT would thus not only run counter to most CASPs business setup but also disproportionately impact retail customers, facing high fees when on average trading amounts in between 10 to 100 EUR. This would not only significantly upend CASPs current business models but also result in a situation, where users would not be able to trade their crypto assets (claims) until their final settlement, e.g. on the next day. (It is also questionable if it is technically even possible to absolutely ensure that the transaction will be completed the next day; it depends on the specific blockchain). This would naturally restrict users’ disposition of their assets — e.g., when the user wants to engage in Day-Trading — and could lead EU-investors to seek alternatives outside the Union thus negatively affecting market depth/liquidity.
In summary, transaction between users on centralized, multi-service platforms are currently not settled on the DLT but are subject to corresponding crediting/debiting of the respective users’ wallets/accounts via the CASP’s internal database. Settlement on the DLT would only come into effect if a user decides to transfer his/her crypto assets to an external wallet, e.g., at another CASP or un-hosted wallet, in which case the crypto assets would be sent from the omnibus wallet/account. In these instances, the requirement to settle these transactions within 1 day (please note that the current wording “on the same date” should be changed) would thus indeed provide legal certainty for all parties involved. Nevertheless, a general requirement to settle every customer transaction on the DLT would be to the detriment of the vast majority of successful incumbent businesses that provide centralized crypto-asset platform solutions, which fare best in terms of cost-efficiency, speed of execution and overall user experience.
For the stated reasons, we believe that Art 68 (8) should restrict the final on-chain settlement rule to transactions involving wallets maintained at different CASPs (or a private wallets) and should thus not apply to transactions where settlement is internalized by the respective centralized CASP.
IV. Alignment of MiCA and AMLD 5
We believe there is a need to align the Anti-Money Laundering Directive (EU) 2015/849 (AMLD) and MiCA in light of the EC’s objective to provide a fully harmonized regime and the establishment of a truly single market for crypto-assets.
Currently, service providers engaged in “virtual currency” exchange service and/or offering custodian wallet services are subject to (distinct) national registration regimes in line with AMLD 5. The requirement to undergo up to 27 registration procedures and the varying national approaches to the transposition of these requirements under the AMLD 5 are significant barriers to market entry and incur substantial costs. In view of the EU’s objectives in relation to the establishment of a Digital Single Market as well as the completion of the Capital Market Union and in line with other financial markets legislation, the AMLD 5 should refer and apply to CASPs licensed and passported pursuant to MiCA in lieu of the current registration regime.
We therefore propose an explicit amendment to the AMLD to replace the different national registration regimes based on the AMLD 5 with reference to the single licenses and passporting of CASPs under MiCA, in order to provide for a true single market for crypto-asset services.
V. Alignment of MiCA and ECSPR
We believe there is also need to align Regulation (EU) 2020/1503 on European Crowdfunding Service Providers for Business (ECSPR) and MiCA in light of the EC’s objective as mentioned above.
Currently, both regulations might be applicable to crowdfunding services based on certain instruments under ECSPR, which are issued by means of DLT. We therefore propose an explicit amendment to MiCA excluding crowdfunding services under ECSPR with instruments that are issued by means of DLT from its application.
VI. Comparison of MiCA to the Prospectus Regulation
Currently, offers of crypto-assets, other than asset-referenced tokens or e-money tokens, to the public, require the prior creation of a whitepaper in accordance with Article 5, if over a period of 12 months, the total consideration of the offer to the public of crypto-assets in the Union exceeds EUR 1,000,000, or the equivalent amount in another currency or in crypto-assets.
We believe that such low threshold is somewhat excessive for smaller offers and could in our opinion inhibit the attractiveness for the industry. Especially the associated liability with such whitepaper- in combination with the tightly tied obligations — will lead to the fact that these whitepapers will be very expensive to create; i.e. very high costs — as we know them from the prospectus law — which would make smaller public offers quite unattractive. To limit liability, whitepapers would also require that everything be described in detail which in turn would make it indispensable to consult experts. The standards related to securities will be decisive here.
In contrast, the Prospectus Regulation provides a corresponding obligation for securities only if the total consideration of the offer to the public exceeds EUR 8,000,000 or equivalent over a period of 12 months. In our opinion, this is a “disadvantage”. Yet, the same obligation to create a whitepaper exists for asset-referenced tokens only if the total consideration of the offer to the public exceeds EUR 5,000,000 or equivalent over a period of 12 months.
Although these regulations are very similar to the regulations for capital market prospectuses (Prospectus Regulation of the EU), the obligations start much earlier. This may well reduce the attractiveness of such public offerings for crypto-assets. We therefore propose to increase such low threshold for crypto-assets offers other than asset-referenced tokens and e-money tokens and to align MiCa with Prospectus Regulation where similar obligations exist to prevent regulatory differences.
Proposal for a pilot regime for market infrastructures based on distributed ledger technology
I. General Remarks
DAAA welcomes the European Commission’s initiative to establish a pilot regime for DLT market infrastructures.
Crypto-assets that resemble traditional financial assets, such as shares or bonds, are generally described as one of the most promising use cases of DLT systems. As they constitute financial instruments, they fall within the scope of existing EU regulation. From an economic point of view, the use of DLT for financial assets has the potential to significantly increase the efficiency of trading and post-trading processes. By reducing costs, financial assets based on DLT may give smaller issuers access to financial markets. Some requirements of the existing regulatory legislation, however, are currently not compatible with distributed systems. As a result, they actively prevent the forming of functioning secondary markets. The existing barriers to establishing regulated trading facilities may also push trading towards the unregulated field, adversely affecting investor protection and market integrity. For these reasons, we consider a regime for DLT market infrastructures important and necessary for the sustainable development of markets for financial instruments based on DLT.
While the existing incompatibilities prevent the establishment of regulated secondary markets, the key obstacles concern requirements for post-trading laid down in Regulation (EU) No 909/2014 (central securities depository regulation). We therefore embrace the focus of the proposed regulation. Furthermore, DLT systems bear a high disruptive potential for post-trading. Currently, intermediation and multiple layers of closed systems characterize the post-trade infrastructure. This may produce redundancies, require significant reconciliation efforts, and impede straight-through processing. DLT systems, by contrast, enable direct participation of retail investors and may provide a unified platform for all processes of the post-trade lifecycle. Consequently, DLT systems could start a transformative process of the post-trade infrastructure. In our view, the proposed pilot regime adequately addresses key obstacles and at the same time provides for a suitable mechanism to allow for innovation processes in the post-trade sector.
Notwithstanding the reasonable approach of the regime, EC may want to consider some of the following aspects concerning specific parts of the proposed regime:
II. Eligible DLT systems
The EC proposal does not expressly state which type of DLT system are eligible for the use in DLT market infrastructures. Recital 28, Article 7 (2) lit. c and Article 8 (2) lit. c mention “proprietary DLT”. Article 6 (2) requires DLT market infrastructures to establish rules on the functioning of the DLT they operate, including rules for accessing the distributed ledger technology and the participation of the validating notes, therefore implying that only permissioned DLT systems are within the scope of the pilot regime. From a regulatory point of view, one may argue that currently
only permissioned DLT systems are equipped to fully comply with existing regulatory principles. However, statements on recent legislative proposals of Member States, such as the German draft legislation on electronic securities (eWpG-E), suggest that inconsistent understanding may occur, if the scope of the regulation is not expressly laid down. We therefore advocate that the EC expressly elaborates on the eligible type of DLT systems in the recitals and, if only certain DLT systems should be within the scope of the pilot regime, lays down the specific reasons for this approach. When addressing eligible types of DLT systems, it is in the interest of the proposal to specify clearly and unambiguously which features eligible DLT systems must have.
If only permissioned DLT systems are within the scope of the pilot regime, this does not necessarily mean that financial assets issued on permissionless DLT systems disappear from the market. We thus encourage the EC to evaluate, how financial assets based on permissionless DLT systems should be dealt with and, importantly, which interfaces between financial assets based on permissionless DLT systems and trading and post-trading market infrastructure exist. For instance, despite their immaterial form, it may be reasonable to allow for the “immobilization” of assets issued on a permissionless DLT system in CSD or DLT MTF, to enable subsequent transfers via a DLT market infrastructure or traditional securities settlement system (see for example draft Article 6 (1) lit. d and Article 6 (3) of the Swiss Book Entry Securities Act, BBl 2020, 7801 [7812 f]).
We also encourage the EC to evaluate, how innovative potential of financial assets based on permissionless DLT systems could be exploited. As the proposal aims to allow for experimentation, the EC may consider allowing for the use of permissionless systems in a more restricted and closely monitored setting.
III. Types of DLT market infrastructure
The EC proposal establishes two different types of DLT market infrastructure: DLT MTFs and DLT securities settlement systems. We believe that this is a powerful approach. DLT securities settlement systems enable CSDs to benefit from the full potential of distributed systems. By also allowing for the trading of DLT transferable securities not recorded in a CSD on a DLT MTF, the proposed regime is able to make use of the disruptive potential of DLT, bringing flexibility to the traditional structure of the post-trade sector.
According to Recital 9, it is justified to allow a DLT MTF to perform activities normally performed by a CSD, because DLT systems could potentially be used as decentralized form of such depository. In a broader sense, we understand this deviation from the requirement of a CSD for securities settlement to be justified because certain functions normally performed by these institutions may be automatically performed or facilitated by the DLT system. Under these circumstances, the EC deems it reasonable to allow investment firms and market operators to perform some activities usually reserved for a CSD subject to Regulation (EU) 909/2014 (central securities depository regulation). However, while under the proposed regime this privilege is only applicable to investment firms or market operators operating a MTF, for the same reasons it may also be justified to allow investment firms not operating a MTF or other regulated institutions to perform these activities, if they use DLT systems for these activities and propose compensatory measures to meet the objectives pursued by the affected provisions of Regulation (EU) 909/2014 (central
securities depository regulation). The EC may thus want to evaluate a corresponding specific permission for appropriate institutions other than those mentioned in the proposal. Possible institutions that may apply for a corresponding permission include depository banks, crypto-custodians or register operators established under the law of a Member State. Alternatively, the EC may want to evaluate to which extent a CSD could potentially perform its key functions (e.g., notary services) for DLT transferable securities outside of its proprietary systems.
However, when granting exemptions from Regulation (EU) 909/2014 (central securities depository regulation), the EC should, generally and especially regarding any subsequent permanent regime, make sure that the objectives of the regulation are achieved using DLT and additional regulatory measures and do not result in a lower level of protection.
IV. Potential role of service providers
Under the proposed regime, it is not entirely clear in which ways traditional novel service providers such as custodians or depositories may be integrated in DLT securities lifecycle and how their role relates to DLT MTFs and DLT settlement systems. We would thus encourage the EC to elaborate on their potential functions.
V. Uniform application of EU law
Recital 20 of the proposed regime implies that the notion of “securities account” and “book-entry form” may require double-entry book keepings not always present in DLT systems. By contrast, the European Central Bank (Advisory Group on Market Infrastructures for Securities and Collateral: The potential impact of DLTs on securities post-trading harmonization and on the wider EU financial market integration, 2017) and ESMA (Advice on Initial Coin Offerings and Crypto-Assets, 2019 — ESMA50–157–1391) argue that there is no comprehensive definition of “securities account” or “book-entry form” at European level. DAAA acknowledges that the possibility to request exemptions under the proposed regulation provides sufficient leeway for differences in national law and different interpretations of EU law by NCAs. However, the interpretation of notions central to post-trading requirements also affects the leeway outside of the pilot regime. Differences in interpretation could also lead to a situation where an institution needs to request an exemption in one Member State, while this would not be necessary in another Member state. The EC may thus consider using the information gathered from reports under the pilot regime to issue guidelines promoting the uniform application of relevant provisions.
VI. Additional compensatory measures imposed by NCAs
Article 4 (1) lit. c and Article 5 (1) lit. c allow the NCAs to impose additional compensatory measures in order to meet the objectives pursued by the provisions from which an exemption is requested or to ensure investor protection, market integrity and/or financial stability. We understand the objectives of these provisions and, considering that the pilot regime in its essence constitutes a regulatory sandbox, see them as a reasonable approach. However, to increase legal certainty, provide guidance for NCAs and prevent a too restrictive regulatory approach hindering innovation,
we advocate to issue at least an indicative list of compensatory measures that may be imposed by NCAs.
VII. Review and amendment or termination of the pilot regime
As previously stated, we consider a pilot regime as a suitable approach to achieve the objectives of the regulation. To successfully further innovation, however, the proposed regime needs to be attractive for market participants. Given the maximum period of six years and the potentially short period between the final reports and decision about any extension, amendment, or termination of the regime, we suggest that the EC grants DLT market infrastructures a sufficient transition period after the final reports. Additionally, the EC may consider interim reports earlier than stipulated in Article 10.
We remain at your disposal.
Yours faithfully
Paul Pöltner (President)
Georg Brameshuber (Work Group Leader)
Working Group Members:
Philipp Bohrn
Georg Brameshuber
Florian Ebner
Martin Erhold
Susanne Kalss
Lorenz Marek
Martin Miernicki
Christian Steiner
Dominik Tyrybon
Johannes Zollner
