Insights European Commission launches Blockchain Regulatory Sandbox for innovative use cases involving Distributed Ledger Technologies (DLTs)


The Commission explains that the Sandbox establishes a pan-European framework for regulatory dialogue to increase legal certainty for innovative blockchain solutions. The Sandbox will run from 2023 to 2026 and will support 20 projects annually. Projects will be chosen through calls for expression of interest. Every year, the most innovative regulator will be awarded a prize. The selection process will be overseen by a panel of independent academic experts.

The Commission recognises that DLTs, including blockchain, have potential beyond financial services. DLTs can support regulatory technologies that help public authorities fight counterfeits in global supply chains and protect verifiable credentials (e.g. education diplomas) against fraud. Companies can facilitate the exchange of non-personal data to train algorithms and/or create unique “digital twins” for assets they buy, sell or insure in the mobility, energy and manufacturing sectors. Financial companies can use DLTs to reduce the cost of trading securities. While pilots have shown significant potential for the use of DLTs across industry sectors, there is currently legal uncertainty as governance remains shared amongst various bodies. To increase legal certainty, dialogue between regulators and innovators is needed. The European Blockchain Regulatory Sandbox addresses this need by offering a trusted environment for regulators and providers of DLTs to engage in.

The goal of the Sandbox is to facilitate cross-border dialogue between regulators and supervisors on the one hand, and companies or public authorities on the other. Use case developers will be able to present their business case and receive guidance. The Sandbox will also allow supervisors to enhance their knowledge of cutting-edge technologies involving DLTs. Lessons learned will be shared between participating regulators, helping the Commission to identify best practices. The Blockchain Regulatory Sandbox will cooperate with other relevant sandboxes, e.g. the EU Digital Finance Platform and the Artificial Intelligence sandboxes once established under the AI Act.

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 DLTs. Priority will be given to more mature use cases where legal and regulatory questions of broader relevance arise.

Innovative public entities and private sector companies (including start-ups and scale-ups) established and operating in the EEA can apply in the first call for expression of interest, which is open until 14 April 2023. The European Blockchain Regulatory Sandbox will operate for three years with three annual cohorts of 20 use cases each. To read the Commission’s news release in full and for links to further information, click here.