German fintech company 21X, one of the four applicants for a blockchain trading infrastructure permit under the European Union’s DLT Pilot Regime, has received regulatory approval to launch a tokenization platform. The firm was granted a license to operate a blockchain-based trading and settlement system regulated by European laws, according to a Dec. 3 announcement.
The license, issued by Germany’s financial supervisory authority, Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin), allows 21X to launch its exchange for tokenized financial instruments from its headquarters in Frankfurt. Following the regulatory approval, 21X plans to go live in the first quarter of 2025, offering services that include tokenization, issuance, distribution, listing, and trading.
The EU’s DLT Pilot Regime is a legal framework for the trading and settlement of transactions involving cryptocurrency assets that qualify as financial instruments under the Markets in Financial Instruments Directive and Regulation (MiFID II). Introduced in March 2023, the regime is designed to facilitate the establishment of new types of market infrastructures, including distributed ledger technology (DLT) trading facilities and settlement systems.
Obtaining the license took 21X 18 months, during which the company cooperated closely with BaFin, the German Federal Bank, and other EU authorities, such as the European Securities and Markets Authority (ESMA) and the European Central Bank (ECB). Max Heinzle, founder and CEO of 21X, called the regulatory approval a “revolutionary moment for capital markets,” highlighting the opportunity for institutional and retail investors to trade tokenized securities on a fully regulated, blockchain-based exchange.
To build its blockchain-based trading platform, 21X has partnered with several key players, including the Ethereum-linked blockchain network Polygon, Apex Group, and SBI Digital Markets, a subsidiary of Japan’s SBI Group. The collaboration with Polygon is intended to leverage the scalability and security of the public blockchain network for executing trades and settlements on-chain.
Polygon’s proof-of-stake protocol is noted for its adoption by thousands of decentralized applications and offers cost-effective transaction fees, fast processing speeds, and strong security measures, making it appealing for traditional finance initiatives. In early December, 21X also announced a strategic partnership with Chainlink, describing it as the “standard for onchain finance.”
According to ESMA, 21X is one of at least four firms that have applied for a license under the EU’s DLT Pilot Regime. As of April, applications under this regime included a DLT trading and settlement system from Germany, a DLT settlement system from the Czech Republic, and a DLT trading facility from the Netherlands. Notably, CSD Prague in the Czech Republic received permission to operate under the DLT Pilot Regime in October.