EU Finance Ministers Push DLT Pilot Regime Cap to €300bn as Lagarde Pushes Back
The Council of the EU has locked in its opening position for trilogue negotiations on the Market Integration and Supervision Package (MISP), and the headline number is stark: finance ministers want to raise the per-infrastructure cap under the DLT Pilot Regime from the current €6 billion all the way to €300 billion, with a further potential step to €500 billion available through a Commission delegated act. European Central Bank President Christine Lagarde has objected publicly, warning that scaling DLT market infrastructure at that pace risks reintroducing the very market fragmentation the package is designed to eliminate. For accounting firms, CFOs, and digital asset auditors, the trajectory of this debate will reshape both the scale and the compliance architecture of tokenised securities markets in Europe.
What the Council's MISP Position Actually Says
The MISP is the European Commission's vehicle for deepening EU capital market integration, and the DLT Pilot Regime sits at its centre. That regime, live since 2023, lets trading and settlement infrastructures operate under a bespoke exemption framework, sidestepping some of the requirements in the Central Securities Depositories Regulation (CSDR) and MiFID II to allow DLT-based market structures to be tested at scale.
The cap escalation in detail
When the Commission tabled its MISP proposal, it suggested raising the per-infrastructure threshold from €6 billion to €100 billion, a significant jump intended to let successful pilot participants grow into commercial viability. EU finance ministers went further: the Council's agreed position sets the cap at €300 billion, with the option to push it to €500 billion via delegated act, bypassing the need for fresh primary legislation each time the market grows. Some industry participants had lobbied for the cap to be dropped entirely, which gives a sense of how far the market believes the original €6 billion ceiling has constrained genuine institutional adoption.
DLT settlement schemes: a parallel expansion
A second strand of the MISP creates a framework for DLT-based settlement schemes, structures that function analogously to a decentralised central securities depository (CSD). The Commission had proposed a €10 billion cap for these schemes. The Council chose to raise that to €50 billion, in line with the minimum recommended by relevant industry bodies. This is a separate vehicle from the pilot regime itself, and the two caps are additive in their market impact: together they describe a potential landscape where DLT infrastructure could sit alongside conventional CSDs at genuine institutional scale.
Lagarde's Fragmentation Warning and What It Signals
ECB President Lagarde's objection is not a procedural footnote. She urged the European Parliament, which must co-legislate the MISP, to revisit the €300 billion figure. Her stated concern is that DLT market structures, if they proliferate rapidly and at scale under looser rules, risk being non-interoperable with each other and with legacy infrastructure. The outcome, she argued, could be a re-fragmentation of European settlement, precisely the opposite of what the MISP targets.
The CSDR exemption tension
Her warning likely also reflects a structural concern about the CSDR exemptions that DLT Pilot Regime participants currently enjoy. Under the regime, operators can seek relief from specific CSDR obligations, including some of the access and linkage rules that conventional CSDs must follow. Those rules exist to ensure interoperability between settlement systems across member states. If DLT infrastructures scale to hundreds of billions in market value while operating under partial CSDR exemptions, the risk of siloed settlement ecosystems becomes real and auditable evidence of settlement finality across those silos becomes correspondingly harder to produce.
Whether Parliament sides with the Council's expansive position or heeds Lagarde's caution will define the regulatory envelope for tokenised markets in Europe for the next decade. Trilogue negotiations have not yet produced a timetable, and the gap between the two positions is material.
MiCA Supervision: Significant CASPs and the National-Level Split
The Council's MISP position also addresses how crypto asset service providers (CASPs) are supervised under MiCA. The Council wants direct EU-level supervision to apply only to CASPs that meet a significance threshold, with all other CASPs remaining under the oversight of national competent authorities. The specific criteria for what constitutes a "significant" CASP are embedded in the Council text and will be subject to negotiation, but the principle signals a tiered architecture similar to how the European Banking Authority supervises significant institutions under the SSM.
What a two-tier CASP regime means operationally
For accounting firms and CFOs with CASP clients or with CASP status themselves, a two-tier model creates two distinct compliance tracks. Significant CASPs will face a centralised, potentially more demanding supervisory relationship with an EU-level authority. Smaller CASPs continue dealing with whichever national authority holds their MiCA licence, which may vary considerably in supervisory intensity and reporting cadence across member states. The practical risk is regulatory arbitrage: firms that sit just below the significance threshold may structure activity to avoid EU-level scrutiny, a dynamic that auditors will need to assess when evaluating a client's regulatory exposure.
Accounting and Financial Reporting Implications
The scale of the proposed cap expansion has direct consequences for how tokenised financial instruments are recognised, measured, and disclosed under IFRS and applicable EU standards.
Fair value and settlement finality
At €300 billion per infrastructure, tokenised securities operating under the pilot regime would enter territory where they are no longer niche instruments. Auditors assessing fair value for Level 2 or Level 3 instruments under IFRS 13 will need to consider whether DLT-based settlement infrastructure provides the same quality of observable inputs as conventional CSD settlement. Incomplete interoperability, as Lagarde warns, would make cross-platform price discovery less reliable, potentially pushing more instruments into Level 3 classification with the associated valuation uncertainty disclosures.
Accounting for positions in DLT settlement schemes
The new DLT settlement scheme category, capped at €50 billion, introduces a further layer of complexity. If these schemes function as decentralised CSDs, the entities that hold positions within them will need to assess whether those positions meet the definition of financial assets under IAS 32 and IFRS 9, how custody and control are established on-chain, and whether the absence of a conventional CSD counterparty affects derecognition analysis. For firms using crypto bookkeeping software or digital asset accounting software to record tokenised positions, the absence of standardised on-chain settlement confirmation messages from a DLT scheme may create data gaps that require manual reconciliation.
Disclosure and going-concern considerations
CFOs of entities with material exposure to DLT Pilot Regime infrastructure should now consider whether the regulatory uncertainty ahead of trilogue constitutes a significant accounting estimate risk warranting disclosure under IAS 1. If Parliament votes to substantially lower the cap, entities that have structured tokenised issuance programmes around the €300 billion headroom face a material change in their operational and regulatory assumptions. That is the kind of contingent regulatory risk that should appear in notes to the financial statements, not be left to the MD&A narrative alone.
For broader context on how tokenised instruments are already being assessed for volatility and liquidity risks, the analysis around tokenized stocks: volatility and liquidity risks the IMF flagged is directly relevant to firms building IFRS 13 hierarchies for on-chain instruments. Similarly, how Crédit Agricole's €100m tokenized fund move affects digital asset accounting illustrates the real-world reporting questions that arise when institutional capital enters DLT-based fund structures at scale.
Practical Steps for Accounting Firms and CFOs
The MISP is in negotiation, not yet law, but the Council position is the clearest statement yet of political direction. There are concrete actions to take now rather than waiting for trilogue to conclude.
Audit and advisory firms
Update client risk assessments to flag DLT Pilot Regime exposure where it exists. Where clients operate or hold assets on pilot regime infrastructure, document how settlement finality is evidenced and whether the current CSDR exemptions affect the audit trail. Develop internal guidance on Level 2 versus Level 3 classification for tokenised instruments, anticipating that interoperability concerns raised by the ECB could affect observable input availability. Review engagement letters to ensure that work scope covers DLT-specific settlement and custody risks, which are often not captured in standard financial instrument audit programmes built around conventional CSD infrastructure.
CFOs and treasury teams
Map current and planned tokenised asset and liability positions against the proposed caps. If your entity is considering issuance or investment activity under the DLT Pilot Regime, build the regulatory uncertainty into the project timeline: a trilogue that heeds Lagarde's objection could result in a lower final cap or additional interoperability requirements that affect programme design. Ensure that your crypto bookkeeping software or digital asset accounting software can handle DLT settlement data without relying solely on conventional CSD confirmation formats. Engage legal advisers now on how a significant CASP designation would affect your supervisory relationship and reporting obligations under MiCA.
Frequently Asked Questions
What is the DLT Pilot Regime and why does the cap matter?
The DLT Pilot Regime is an EU regulatory sandbox that allows trading and settlement infrastructures built on distributed ledger technology to operate under tailored exemptions from rules such as MiFID II and CSDR. The per-infrastructure cap limits the total market value of instruments that can be admitted, traded, or settled on a single pilot regime platform. A low cap, like the original €6 billion, restricts commercial viability. The proposed jump to €300 billion would allow institutional-scale tokenised securities markets to develop within the regime rather than waiting for permanent legislation.
What does Lagarde's objection mean for the timeline?
Her public intervention signals that the ECB, as a key EU institution, will push Parliament to temper the Council's position in trilogue. This does not automatically reduce the final cap, but it does mean the negotiation will be contested and potentially prolonged. Firms should plan for regulatory uncertainty lasting through at least the first half of 2027, and should not make irreversible infrastructure or issuance commitments that depend on the €300 billion figure becoming law.
How does the significant CASP threshold affect MiCA compliance?
The MISP would create a two-tier supervisory system under MiCA. Significant CASPs would be supervised directly at the EU level, likely by ESMA or a designated body, while non-significant CASPs remain with national competent authorities. For compliance teams, this means the applicable supervisory expectations, reporting formats, and examination cycles could differ substantially depending on which tier a firm falls into. Firms near the significance boundary need to model both scenarios and document their assessment of which tier applies to them.
What are the audit implications of DLT-based settlement schemes?
The proposed DLT settlement scheme category, functioning like a decentralised CSD, lacks the established audit trail that conventional CSD infrastructure provides. Auditors will need to assess how settlement finality is demonstrated on-chain, whether smart contract logic constitutes sufficient evidence of legal title transfer, and how to treat positions if the scheme itself lacks regulatory authorisation during a transitional period. These are live technical audit questions for which standard audit programmes currently offer limited guidance.
Do firms need to update their crypto accounting software for MISP compliance?
Not immediately, because MISP is not yet finalised. However, the direction of travel is clear: tokenised securities will grow in volume and regulatory complexity. Firms should assess whether their existing crypto accounting software can ingest settlement data from DLT-based infrastructure, handle the asset classification distinctions between pilot regime instruments and conventional securities, and generate the disclosures required under IFRS 13 and IFRS 7 for on-chain instruments. Gaps identified now are cheaper to address than gaps discovered during a statutory audit.
Source: Ledger Insights