Germany: Financial regulators issue first license for a blockchain-based trading and settlement system
Written By
Partner
Germany
As co-head of the global Finance & Financial Regulation Practice Groups and head of the German Finance & Financial Regulation Practice Group, I advise on national and international finance and capital markets law as well as on commercial and corporate law. I am also a member of the international steering group of our Financial Services Sector Group.
Partner
Germany
As partner in our Finance & Financial Regulation Group in Frankfurt, I advise our national and international clients on banking regulatory issues and finance law.
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Why is this important?
Frankfurt-based fintech firm 21X has become the first German firm in the EU to receive a license to operate a multilateral trading facility and settlement system for tokenized securities and other DLT-based financial instruments. The license was granted under the so-called DLT Pilot Regime.
After one and a half years of intensive scrutiny by BaFin, the Bundesbank and European supervisory authorities (including the European Securities and Markets Authority (ESMA) and the European Central Bank (ECB)), 21X was granted permission to operate as a regulated multilateral trading facility for tokenized securities in the future. Transactions will be processed via the Polygon blockchain. The granting of this first license as a DLT TSS is of particular importance for the crypto sector. Previously, a Czech company was granted a license under the DLT Pilot Regime in October 2024; however, this only covers the operation of a settlement system (DLT SS), not a multilateral trading facility.
Conclusion & outlook
The licensing of a DLT TSS marks a significant step forward in the integration of blockchain technologies into the traditional financial sector and could revolutionise the market for tokenized securities. Blockchain technologies have been one of the most discussed topics in the financial markets since 2013. Blockchain technologies are so en-vogue that it was only a matter of time before the trading and settlement of tokenized securities was regulated and licensed.
