The German fintech company 21X, one of the four applicants for a blockchain trading infrastructure license under the EU's DLT Pilot Regime, has received regulatory approval to launch its tokenization platform.
The company announced on December 3 that it has been granted a license to operate a trading and settlement system based on blockchain technology in accordance with European law.
This license, issued by the German Federal Financial Supervisory Authority (BaFin), allows 21X to deploy a trading venue for tokenized financial instruments from its headquarters in Frankfurt.
After the approval, 21X plans to launch in the first quarter of 2025, offering services such as 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 the trading and settlement of eligible crypto-asset financial instruments under the Markets in Financial Instruments Directive and Regulation (MiFID II).
The regime came into effect in March 2023, enabling the establishment of new market infrastructure types, including Distributed Ledger Technology (DLT)-based Multilateral Trading Facilities (MTFs), DLT-based settlement systems, and DLT-based trading and settlement systems.
According to 21X, the company spent 18 months obtaining the license, during which it collaborated with BaFin, the German Central Bank, and EU authorities, including the European Securities and Markets Authority (ESMA) and the European Central Bank (ECB).
"This is not just a license – it's a revolutionary moment for the capital markets," said Max Heinzle, CEO and founder of 21X, adding:
"For the first time, institutional and retail investors can trade and settle tokenized securities on a fully regulated, blockchain-based trading venue with the same level of trust, security, and compliance as traditional markets."
21X partners with Polygon and Chainlink
To build its blockchain-based trading platform, 21X has partnered with several partners, including the Polygon blockchain network connected to Ethereum, the global financial services provider Apex Group, and SBI Digital Markets, a subsidiary of the Japanese financial conglomerate SBI Group.
Through the collaboration with Polygon Labs, the software development company co-building the Polygon ecosystem and AggLayer, 21X is leveraging the scalability and security of the public blockchain network to execute on-chain transactions and settlements, according to the company's announcement.
21X stated in an October press release:
"Polygon's proof-of-stake protocol is one of the most widely adopted globally, with a vast network supporting tens of thousands of decentralized applications."
Among the key factors driving the appeal of Polygon to traditional finance, 21X cited "efficient transaction costs, fast transaction processing speeds, and robust security measures."
In early December, 21X also announced a strategic partnership with the Web3 services platform Chainlink, introducing the platform as the "standard for blockchain finance."
Other DLT Pilot Regime applications in the EU
According to the official announcement from ESMA, 21X is one of at least four companies that have submitted applications under the EU's DLT Pilot Regime.
As of April, one application for a DLT-based trading and settlement system and one application for a DLT-based Multilateral Trading Facility (MTF) have been submitted from Germany, along with an application for a DLT-based settlement system from the Czech Republic and an application for a DLT-based trading and settlement system from the Netherlands.
According to ESMA's list of licensed DLT market infrastructures, the CSD Prague of the Czech Republic has received approval to operate under the EU's DLT Pilot Regime as of October 11.
