The European Commission has announced the launch of a regulatory sandbox for innovative use cases involving Distributed Ledger Technologies (DLT), which aims to establish a pan-European framework for regulatory dialogues to increase legal certainty for innovative blockchain solutions.
The sandbox, funded by the Digital Europe Programme and delivering on the SME strategy, is set to run from 2023 to 2026 and will annually support 20 projects including public sector use cases on the European Blockchain Services Infrastructure. Projects will be chosen through calls for expression of interest.
DLT has a wide range of applications beyond financial services, including supporting regulatory technologies that help public authorities fight counterfeit in global supply chains and protect verifiable credentials such as education diplomas against fraud. Companies can also facilitate the exchange of non-personal data to train algorithms and create unique digital twins for assets they buy, sell, or insure in the mobility, energy, and manufacturing sectors. Financial actors expect to use DLT for reducing the cost of trading securities.
The European Blockchain Regulatory Sandbox aims to facilitate cross-border dialogue between regulators and supervisors on one hand, and companies or public authorities on the other hand. Use case developers can present their business case to receive legal guidance from regulators in a trusted environment.
The law firm Bird & Bird will act as a facilitator, set up a safe interface between developers and regulators, and provide legal advice to selected blockchain use cases. The sandbox will allow supervisors to enhance their knowledge of cutting-edge technologies involving DLT, with lessons learned shared between participating regulators.
The sandbox is open to companies from all industry sectors and public entities for projects beyond a proof-of-concept stage and already close-to-market or at an early stage of being operational, involving the use of DLT.
Priority will be given to more mature use cases where legal and regulatory questions of broader relevance arise. Use cases chosen for deployment between public authorities in the European Blockchain Services Infrastructure will have priority, but up to 20 use cases with a cross-border dimension can participate annually as well.
Innovative public entities and private sector companies (including start-ups and scale-ups) established and operating in the European Economic Area can apply in the first call for expression of interest, which has just been launched and will be open until April 14, 2023. The European Blockchain Regulatory Sandbox will operate for three years with three annual cohorts of 20 use cases each. A designated web portal for the European Blockchain Regulatory Sandbox is now live and features all relevant information for interested parties.
In a separate fintech-related development at the EU level, the European Commission has announced progress towards the introduction of an EU-wide “digital wallet” known as the ‘EUDI Wallet‘. The wallet is being developed to provide a secure and convenient way for European citizens and businesses to identify themselves when needed for accessing digital services at the click of a button on their phone. The wallet will allow citizens to store credentials, such as a mobile driving license, professional licenses, eHealth or educational credentials.
The Commission has published a 42-page ‘European Digital Identity Wallet Architecture and Reference Framework – Version 1.0‘ and its newly published framework will be the technical backbone to engineer a prototype wallet for testing various use cases. The Commission is also supporting large-scale pilots, with up to €50 million of co-financing, to address high-priority use cases for the wallet, including payments.
