The European Union’s DLT Pilot Regime, which came into effect nearly a year ago, enables the issuance and trading of securities in tokenized form through a distributed ledger technology (DLT) based registry system. Due to its pilot nature, the regulation creates a regulatory sandbox environment at the European level, aiming to promote the widespread adoption of the new form of securities and the development of an accompanying ecosystem.
In response to the regulation, several traditional financial institutions have already shown interest in the field:
- HSBC became the first in the world to offer tokenized gold to investors
- Société Générale issued digital green bond tokens on the Ethereum network worth 10 million euros.
- ABN Amro became the first to register a digital bond on a public blockchain.
- Santander initiated loans backed by tokenized commodities.
But what are the advantages?
Tokenized securities (in contrast to today’s dematerialized securities) operate on distributed ledger technology (e.g., blockchain), thus paving the way for a cheaper, simpler, and faster securities ecosystem that benefits investors.
The immediate settlement and reconciliation of transactions, as well as the automated handling of corporate events, can not only save time but also enable cost savings. Since the process simplifies and fewer parties are required for trade settlement.
It is important to note that central entities’ roles in tokenized securities are still unclear. Specifically how legal roles and responsibilities will evolve. At present, the DLT Pilot Regime does not explicitly address this question. But as the experimental phase progresses, the number of open questions steadily decreases.
And what do we do?
Dorsum is committed to pioneering the world of tokenized securities and building on the opportunities provided by the regulation. That is why we began developing our securities tokenization platform in November 2022. This platform will enable issuers to offer tokenized securities on the primary market and trade them on the secondary market.
For more details read the full document below:
https://eur-lex.europa.eu/eli/reg/2022/858/oj
