Investigation intensifies within EU Commission regarding distributed ledger technology concerns in the context of the capital markets union proposal
The European Commission's ongoing consultation on the Capital Markets Union (CMU) and Distributed Ledger Technology (DLT) is shaping the future of the European digital assets landscape. The consultation, which runs until 10 June, is part of the Commission's Savings and Investment Union (SIU) strategy and aims to strike a balance between providing legal clarity and increasing compliance burden in the European digital assets landscape.
One of the key areas of focus is the DLT Pilot Regime. So far, only two institutions, 21X and CSD Prague, have received approval under this regime. The consultation includes a five-page section dedicated to the DLT Pilot Regime and tokenization, and it probes potential changes. The Commission is contemplating the regulation of interoperability providers due to the historical loss of funds on permissionless blockchains.
The consultation offers several options for the preferred connecting factor in relation to transactions on a DLT system, such as the law chosen by the participants, the law chosen by the network participants, the law of the legal entity operating the DLT-based system, etc. It also raises questions about the applicable law for transactions on a DLT system, given its complexity and potential linkage to multiple countries.
The consultation is extensive and includes many detailed questions about DLT. A whole section of the consultation relates to permissionless blockchains. The Commission mentions that the EU transition rules for Basel don't make a distinction between permissionless and permissioned chains. It also considers the possibility of different rules on conflict of laws for permissioned and permissionless DLT systems.
The consultation poses specific questions about the limits on transaction volumes. The Commission wants to know whether these limits should be adapted to the size of the participant. The consultation also explores whether the licenses granted under the DLT Pilot Regime should be permanent.
In terms of multi DLT interoperability, the Commission is considering multiple options, including a Central Securities Depository (CSD) integrated with numerous blockchains, a technology company providing interoperability for regulated financial institutions, and a regulated entity providing an interoperability solution.
The consultation process is ongoing and set to shape policy developments in the next few years. However, as of August 2025, no detailed official conclusions or legal reforms have been published publicly. Stakeholders like the German Banking Association (BdB) and other market participants have provided feedback emphasizing the need for comprehensive reforms beyond piecemeal adjustments to regulation.
[1] European Commission. (2025). Capital Markets Union Action Plan: Building a Europe that invests more. Retrieved from https://ec.europa.eu/info/publications/capital-markets-union-action-plan-building-europe-invests-more_en [4] European Commission. (2025). CMU Reform Package: Simplifying and strengthening Europe's capital markets union. Retrieved from https://ec.europa.eu/info/publications/cmu-reform-package-simplifying-and-strengthening-europes-capital-markets-union_en [5] German Banking Association. (2025). Feedback on the European Commission's consultation on the Capital Markets Union and Distributed Ledger Technology. Retrieved from https://www.bdg.de/en/position/feedback-on-the-european-commissions-consultation-on-the-capital-markets-union-and-distributed-ledger-technology/
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