As for all that supposed change, let’s be honest—it’s been more of a whimper than a bang. The numbers don't lie. Only a couple dozen projects approved since April 2023. That’s hardly setting the world on fire. So, why the slow burn?

Activity Limits Too Restrictive?

The core issue? The Pilot Regime, as currently structured, is just too prohibitive for serious players. Pretend you’re trying to construct a 100-story skyscraper with those Lego bricks. And that’s the reality it feels like to many larger institutions attempting to navigate the space within the outlined guardrails. The French (AMF) and Italian (CONSOB) regulators understand this. Their proposal for “increased proportionality” according to scale of projects is a great bit of reality-injection.

Think of it like this: a startup needs seed money to grow, not a loan that's smaller than their monthly rent. These limits on activity are choking innovation in the crib before it ever really gets an opportunity to develop. This isn't just about making life easier for big banks; it's about creating a level playing field where European innovation can compete globally.

UK's DSS: The Elephant in the Room

Let’s not kid ourselves that the EU is doing this in a bubble. The UK's Digital Securities Sandbox (DSS) is breathing down its neck, adapting trading limits to the organization's scale, a move that is far more pragmatic. This isn’t nationalistic pride talking—this is a big competitive issue going forward. Europe can still lead the way in digital finance by making the conditions more attractive. To do that, it has to beat out its competition – hands down. We are pleased that AMF and CONSOB’s recommendation that ESMA should have the power to adjust the limits is similarly central. We need agility, not bureaucracy.

Here’s where the “magical link” comes into play. Remember the space race? The US didn’t succeed by following the tried and true playbook. They were innovating, they were adapting, and they were taking risks. The EU should take a similar approach when it comes to DLT. Otherwise, it risks being run over in the dust. In many ways, the anxiety of falling behind would make for a more potent impetus.

Duration & Exit: The Commitment Issue

This is probably the biggest red flag Disruptors have ever waved in front of larger entities. Why would a major institution invest significant resources into a project that might be shut down in a few years? It’s as if you began a marathon fully aware you were going to be yanked from the race midway.

Extending the duration and clarifying the exit process would be important first steps toward building third-party confidence and fostering long-term investment. Think of it as building a house. After all, you wouldn’t begin building without being sure that you’ll get to own the finished product. Likewise, companies require assurance that their DLT investments are not going to be wasted.

In addition, regulators’ directive to allow more widespread use of electronic money tokens (EMTs) and tokenized deposits is a new paradigm shift. Consider a future in which transactions are immediate and seamless at all times, fueled by stablecoins and CBDCs. This is the amazing promise of DLT, and regulators should dive in with both feet. The AMF's previous suggestion that an institution shouldn't need a CSD license to qualify for a DLT Pilot Regime settlement license is another smart move towards streamlining the process.

The chairs of AMF and CONSOB are right: Europe needs a competitive framework to foster DLT innovation. Their bold move is no doubt a crucial step in the right direction. It's just the beginning. We need to see concrete action, swift implementation, and a willingness to adapt to the rapidly evolving landscape of digital finance. Otherwise, the DLT Pilot Regime will be a missed opportunity, a footnote in the history of financial innovation. That would be a shame.