Welcome to the May edition of our Legal Digest in 2024, where we dissect the intricacies of asset tokenization regulations.
Throughout this series, we aim to navigate the complexities of transformative legislation, shedding light on its impact on the tokenization of assets and exploring the implications for investors, financial entities, and the broader market. Join us as we uncover the regulatory framework and unravel its implications in the world of asset tokenization.
So let’s explore what May brought to the table:
The BIS, in collaboration with seven central banks, unveils Project Agorá, a joint initiative to explore the potential of tokenization in revolutionizing cross-border payments. Drawing inspiration from the BIS’s unified ledger concept, the project aims to seamlessly integrate tokenized commercial bank deposits with wholesale central bank money within a public-private programmable financial platform. By harnessing smart contracts and programmability, Project Agorá seeks to address existing structural inefficiencies in cross-border transactions, including disparate legal, regulatory, and technical requirements, operating hour disparities, and the complexity of financial integrity controls. The BIS will invite private financial institutions to participate, facilitated by the Institute of International Finance (IIF), with regulated institutions from each of the seven currencies expected to take part. Specific guidelines for participation will follow, with membership in the IIF not mandatory for involvement.
ESMA has issued a letter to the EC, EP, and the Council of the EU, providing an interim update on the implementation of the DLT Pilot Regime. While the regulation mandates ESMA to publish annual interim reports, as of March 24, 2024, no DLT market infrastructures have been authorized. Therefore, ESMA won’t publish a report but instead offers an update on the status of submitted applications and key challenges. Four official applications are under assessment by NCAs, with around eight potential applications expected this year. ESMA notes the novelty of the regime as a factor in its slow uptake and identifies challenges for EC consideration, including innovative cash settlement solutions, self-hosted wallets, DLT financial instrument scope and thresholds, and the regime’s duration clarification.
