German fintech 21X, one of the four applicants for a blockchain trading infrastructure permit under the European Union’s DLT Pilot Regime, has secured regulatory approval to launch a tokenization platform.
The firm received a license to operate a blockchain-based trading and settlement system regulated by European laws, it announced on Dec. 3.
Granted by German financial supervisory authority, Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin), the license enables 21X to launch its exchange for tokenized financial instruments from its Frankfurt headquarters.
Following the approval, 21X plans to launch in the first quarter of 2025, featuring services including tokenization, issuance, distribution, listing and trading.
What is the EU’s DLT Pilot Regime?
The EU’s DLT Pilot Regime is a legal framework for trading and settlement of transactions in cryptocurrency assets that qualify as financial instruments under the Markets in Financial Instruments Directive and Regulation, or MiFID II.
Entered into force in March 2023, the regime facilitates the setup of new types of market infrastructures, including distributed ledger technology (DLT) multilateral trading facility, DLT settlement system and DLT trading and settlement system.
According to 21X, it took 18 months to receive the license, during which it cooperated with BaFin, the German Federal Bank and EU authorities, including the European Securities and Markets Authority (ESMA) and the European Central Bank (ECB).
“This is more than just a license — it’s a revolutionary moment for capital markets,” 21X founder CEO Max Heinzle said, adding:
“For the first time ever, institutional and retail investors can trade and settle tokenized securities on a fully regulated, blockchain-based exchange with the same level of trust, security and compliance as traditional markets.”
21X collaborates with Polygon and Chainlink
In order to build its blockchain-based trading platform, 21X has been working with several partners, including the Ethereum-linked blockchain network Polygon, the global financial services provider Apex Group and SBI Digital Markets, a subsidiary of the Japanese financial conglomerate SBI Group.
Through its collaboration with Polygon Labs, the software development company co-developing the Polygon and AggLayer ecosystems, 21X is leveraging the scalability and security of a public blockchain network to execute trades and settlements onchain, the firm said.
“Polygon proof-of-stake stands out as one of the most widely adopted protocols globally, boasting an extensive network that supports tens of thousands of decentralized applications,” 21X said in a news release in October.
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Among key factors behind Polygon’s appeal to traditional finance, 21X mentioned “cost-effective transaction fees, rapid transaction processing speeds and robust security measures.”
In early December, 21X also announced a strategic partnership with the Web3 services platform Chainlink, introducing it as the “standard for onchain finance.”
Other applications under the EU’s DLT Pilot Regime
According to an official communication from ESMA, 21X is one of at least four companies that have applied for a license under the EU’s DLT Pilot Regime.
As of April, one DLT trading and settlement system and one DLT multilateral trading facility application came from Germany, with one DLT settlement system application from the Czech Republic and another DLT trading and settlement system application from the Netherlands.
According to ESMA’s list of authorized DLT market infrastructures, the Czech Republic’s CSD Prague received permission to operate under the EU’s DLT Pilot Regime on Oct. 11.
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