• Institutional Briefing
  • Posts
  • EU Commission Proposes Major Overhaul of Pilot Regime in Move Toward DLT-Based Markets

EU Commission Proposes Major Overhaul of Pilot Regime in Move Toward DLT-Based Markets

Last week, the European Commission proposed a set of measures designed to lay the foundations for a future European capital market built on blockchain. At its core is a major overhaul of the Pilot Regime, the EU framework that lets financial institutions trade and settle tokenized securities under regulatory supervision.

AuthorAuthor

Louis Tellier & Maximilian Vargas
December 11, 2025

There are just seven working days left before the U.S. Senate breaks for the holidays, and lawmakers are squeezing in some last-minute bargaining. At stake: a market structure bill that would become the Trump administration’s second major piece of crypto legislation, right behind the GENIUS Act.

But the two parties remain far apart. Democrats continue to push for restrictions on elected officials and their families profiting from digital assets while in office (which seems reasonable).

Another priority: closing the GENIUS Act’s loophole that lets affiliates pass stablecoin yield through to users, raising fears of deposit flight from smaller community banks.

With time running out, chances of a 2025 passage are slim. But judging by the effort on both sides, this bill is likely to top the Senate’s New Year’s resolution list.

Today, we also talk about:

  • EU Commission proposes major overhaul of Pilot Regime

  • Inside SIX’s new digital assets strategy

HIGH SIGNAL NEWS

→ For a real-time feed of high signal news, visit our News Aggregator.

TOKENIZATION

EU Commission Proposes Major Overhaul of Pilot Regime in Move Toward DLT-Based Markets

Toward onchain capital markets: Last week, the European Commission proposed a set of measures designed to lay the foundations for a future European capital market built on blockchain. At its core is a major overhaul of the Pilot Regime, the EU framework that lets financial institutions trade and settle tokenized securities under regulatory supervision.

  • Why it matters: The Pilot was meant to serve as Europe’s real-market testbed for blockchain, but it drew only six participants. The reasons were structural: a €6 billion aggregate cap on all instruments admitted to a DLT system, size limits that excluded funds above €500 million, and the regime’s temporary nature, which discouraged long-term investment. As a result, activity remained minimal despite rising interest in tokenization.

From temporary to permanent: The Commission now wants the Pilot Regime to operate without a predefined end date, transforming what was originally a time-limited experiment into a stable, long-term framework.

  • “Removing that uncertainty now gives us much greater confidence to build the ecosystem we need around our platform,” explained Dirk Kruwinnus, CPO at Seturion, Boerse Stuttgart’s recently unveiled settlement platform for tokenized assets, as the group is currently undergoing approval under the Pilot Regime.

A three-tier regulatory structure: To broaden participation, the Commission also proposes to replace the current one-size-fits-all setup with a three-tier model. Such a reform would open the regime to both major institutions and smaller players and CASPs like crypto exchanges, who were previously barred from applying.

Unlocking scale: Under the new tiers, annual volumes could rise to €10-100 billion. The previous restrictions on listing debt, equities and funds would disappear, and participants could settle using tokenized deposits or MiCA-regulated stablecoins, a pragmatic bridge while a CBDC remains distant.

Supervision by ESMA: Supervision of most Pilot participants would also shift from national regulators to ESMA, the EU’s financial regulator. The move is intended to harmonize oversight and ensure consistent application across member states.

A parallel track for incumbents: Crucially, the Pilot is not the only path forward. The package also proposes targeted amendments to the rulebook for traditional CSDs like Euroclear and Clearstream.

  • These changes would let them perform atomic settlement without involving a clearing house, removing a longstanding barrier to adopting DLT within traditional infrastructure. In practice, this creates a parallel route to DLT adoption for major incumbents, without requiring them to join the Pilot Regime.

What’s next: The proposal now moves to Parliament and Council for separate reviews before trilogue negotiations. Under favourable political conditions, the new framework could enter into force in under two years.

Frédérick Lacroix is a partner at the law firm Clifford Chance. He leads the firm’s Financial Regulation and Fintech practice in France and co-leads the global Financial Regulations practice of the firm.

The Commission’s package is a clear admission that the Pilot Regime, as designed, could never attract major market participants. By lifting caps, widening settlement options and offering a stable, tiered framework, Brussels is finally giving institutions a structure they can build against in the long run.

At the same time, the targeted amendments for CSDs and the move to clarify how traditional systems can use DLT without changing their regulatory status may prove just as important as the Pilot itself.

Where the real uncertainty lies is political. Folding these reforms into the wider Capital Market Integration Package places them alongside the highly sensitive question of shifting supervisory power to ESMA. If that debate hardens, the risk is that the entire process slows down, delaying precisely the reforms meant to accelerate adoption, well beyond the hoped-for two years.

MARKET INFRASTRUCTURE

SIX’s Digital Strategy Reset: An Interview With Marco Kessler

Strategic consolidation: In December, SIX, Europe’s fourth-largest stock exchange, restructured its business by integrating its digital asset platform, SIX Digital Exchange (SDX), into its core market infrastructure. After years of experimentation, the group is now consolidating to match the contours of actual market demand.

  • “When we built SDX in 2018, there were no reference models for how to build a digital FMI. Looking back, we probably implemented too much directly on DLT early on, not because it was wrong, but because the market wasn’t ready to consume it,” explained Marco Kessler, Head of Product and Business Development for Digital Assets at SIX.

Why it matters: Launched in 2019 as a prototype, SDX stands out as one of the only fully regulated digital market infrastructures in the world that mirrors the structure of traditional FMIs. Unlike most tokenization platforms or crypto exchanges, SDX received both a stock exchange license and a CSD license from FINMA, enabling it to operate the entire lifecycle of a digital security within a regulated environment.

Interview: In our conversation, Kessler explains the rationale behind integrating selected SDX activities into the core market infrastructure, the growing institutional appetite for crypto assets, and the roadmap for the next 12-24 months.

__________________

On why SIX decided to integrate SDX into the core FMI:

“SDX was launched with two licenses — an exchange and a CSD. We have retired the exchange license, while the digital CSD and all its post-trade capabilities are now embedded directly into SIX’s main infrastructure.

This integration removes the need for institutions to join a separate digital venue. Instead, digital issuance, servicing, custody, settlement and wCBDC become part of the infrastructure they already rely on. Additionally, we are exploring the addition of crypto and stablecoin custody as an additional integrated service.

The only component we paused is the atomic settlement model. It works technically, but the market isn’t operationally ready. We can bring it back once the market is ready.”

On lessons learned from the early SDX years:

“The biggest lesson is that efficiency alone doesn’t guarantee adoption when it requires deep internal change. Atomic settlement eliminates counterparty risk, but it forces traders and banks to rethink workflows built over decades, and that kind of shift takes time.

We also learned that starting with digital bonds limited adoption simply because these instruments see very little on-exchange secondary market activity. And with around 20 members and roughly a dozen digital bonds, the standalone SDX venue simply didn’t have the scale needed to build liquidity.”

On where client demand is strongest today:

“By far, the strongest demand today is for crypto and stablecoins. Every bank is asking whether this is an opportunity or a threat, and these discussions now take place at the C-level, not just within digital asset teams.

The next area of demand is tokenized money market funds, especially as settlement assets, where they increasingly function like operational tools similar to stablecoins. Private market instruments, such as pre-IPO companies, are gaining interest too, and we’re exploring these use cases through our collaboration with Citi.

Finally, digital bonds continue to be the entry point for most banks: simple instruments that help them learn the legal, operational and technical aspects of DLT. They are an on-ramp, not a driver of new funding or market growth.”

On integrating crypto and stablecoins into a regulated CSD:

“We’re currently exploring with the regulator the possibility to allow the CSD to offer custody, staking, trading connectivity and collateral services for crypto and stablecoins. If approved, clients could in principle post BTC, ETH, stablecoins and securities within one unified FMI environment.

For many banks, especially smaller ones, this removes the need to build a full crypto stack. They would simply activate the service through their existing SIX connection.”

On the roadmap for the next 12-24 months:

“Our priority is evolving the digital CSD into a multi-ledger architecture. That means evolving the architecture to support Corda but also other types of technologies such as public chains, EVM-compatible environments and more flexible connectivity.

At the same time, we’re extending digital infrastructure across Switzerland and Europe. As our door to Europe, Iberclear is already involved in ECB CBDC pilots, and regarding digital in Europe, there is more to come from SIX.”

  1. Project Rialto – Technical Report (BIS Innovation Hub) — A BIS experiment showing how instant cross-border retail payments can be enabled by linking instant payment systems and using automated FX and settlement in tokenized central bank money.

  2. CACEIS Tokenisation Report (Funds Europe / CACEIS) — A survey outlining how institutional investors view fund tokenization as a strategic shift that can improve operational efficiency, support digitalisation, and expand distribution through blockchain.

  3. Specialized Stablecoin Fintechs (Multicoin Capital) — A report describing how specialized stablecoin-focused fintech firms are reshaping traditional banking by enabling open and programmable financial services built on stablecoins rather than legacy rails.

→ Want more? Visit Blockstories Library for a curated selection of 120+ reports on digital assets.

What do you think of today's briefing?

Login or Subscribe to participate in polls.

Disclaimer: The information provided in the Institutional Briefing by Blockstories does not constitute investment advice. Accordingly, we assume no liability for any investment decisions made based on the content presented herein.

Reply

or to participate.