At the core of the Digital Finance Strategy operated of the EU are the Regulation on Markets for Crypto-Assets (MiCAR) and the Regulation on a Pilot Regime for DLT-based Market Infrastructures (DLT-Pilot Regime).

On 2 June 2022, Regulation EU/2022/858 on the Pilot Regime for Distributed Ledger Technology-based Market Infrastructures (“DLT Regulation”) was published. The Regulation, which comes into force on 23 March 2023, creates an EU-wide regulatory sandbox regime, limited to 6 years, with which the currently existing regulatory barriers for DLT market infrastructures are to be removed and, on a trial basis, operation is to be made possible within a limited framework for DLT-based market infrastructures. This is intended to better exploit the development potential of the new blockchain technology while complying with the requirements of transparency, investor protection and financial stability.

As of 23 March 2023, existing investment firms and CSDs may apply to their regulator for inclusion in the DLT Pilot Regime. Further also new market participants may apply for corresponding licenses as investment firms or CSDs with an inclusion into the DLT Pilot Regime.

The DLT Regulation will enable the operation of DLT-based Multilateral Trading Facilities (DLT-MTF) and Settlement Systems (DLT-SS), as well as Combined DLT Trading and Settlement Systems (DLT-TSS), and will remove previously existing CSDR barriers to the extent of the regulation. In particular, operators will be able to apply for exemption from the CSD requirement under the CSDR.

The DLT Regulation only covers so-called “DLT transferable securities.” These are crypto-assets that are considered securities under MiFID II issued, transferred and stored using distributed ledger technology (Tokenized Securities). It does not cover derivatives and money market instruments. In contrast, MiCAR covers all crypto-assets, which precisely do not qualify as financial instruments and were previously unregulated.

In addition, the provisions of DLT Regulation allow the market operator to engage directly with end users and admit them directly as users on a DLT MTF.

Due to its design as a sandbox regime, there are certain product-dependent thresholds that a DLT market operator may not exceed.

The DLT Regulation therefore creates the basis, long demanded by market participants, for tokenized securities, which are subject to the provisions of MIFID II, to be traded and also settled on multilateral trading venues in the future.

Such as MiCA also the DLT Regulation is another legal act which is also relevant for Liechtenstein as a member of the European Economic Area (EEA) and will accordingly also enter into force in Liechtenstein following a corresponding EEA endorsement decision.

The Principality of Liechtenstein has already demonstrated through the Liechtenstein Blockchain Act of January 2020 that it has a strong interest in promoting distributed ledger technology and regulating crypto assets as well as services related to crypto assets. Accordingly, the Principality of Liechtenstein is also strongly committed to an immediate adoption of DLT Regulation into the EEA. According to current information, it can be expected that the DLT Regulation and thus the DLT Pilot Regime will also be fully applicable in Liechtenstein by summer 2023 at the latest.

Accordingly, as of summer 2023, it will also be possible for securities companies in Liechtenstein to become subject to the DLT Pilot Regime and subsequently to operate a DLT-MTF, DLT-SS or DLT-TSS.

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