In the rapidly evolving world of crypto and digital assets, regulators are being forced to adapt to new challenges posed by digitalisation. The main challenge is establishing an integrated regulatory framework which supports market transparency and competition,
allowing global standards to incentivise further innovation and growth in the industry.
Part of this adaptation includes mandating Digital Token Identifiers (DTIs) to provide market participants and regulators with an internationally recognised standard to record and report digital assets and enhance transparency and oversight. DTIs are essential
for the future of digital asset regulation, offering significant benefits that outweigh costs.
Given this will add more data requirements to regulatory frameworks, it’s not surprising that industry stakeholders are asking some key questions. Firstly, why the DTI is being proposed and its purpose; and secondly, what it means operationally?
The DTI has emerged as an ISO standard, complementing the well-established International Securities Identification Number (ISIN), to uniquely identify digital assets issued on distributed ledger technologies (DLTs). The two standards have different functions
and metadata but are intrinsically linked: ISINs provide economic attributes of the asset and DTIs provide crucial technical implementation details of the token. Where a financial instrument is tokenised on multiple DLTs, each instance gets its own DTI, which
are then grouped as a Functional Fungible Group (FFG) and linked to ISIN of the asset. Together, these ISO standards provide a holistic view of asset and token data needed for safe market conduct.
The European Securities and Markets Authority (ESMA) and the UK’s Financial Conduct Authority (FCA) are leading the charge on integrating the DTI into their markets in financial instruments (MiFIR) regimes. ESMA launched its consultation on transaction reporting
and order book data under the MiFIR Review in October 2024. A key proposal is adopting the DTI for reporting and record-keeping of DLT financial instruments — building on insights from its DLT Pilot Regime review and aligning with MiCA's mandated use of DTI
for non-financial instruments.
After a call for evidence and launch of the EU’s DLT Pilot Regime, ESMA published its
final report highlighting the importance of DTIs for data reporting in a DLT environment. In this report, ESMA identified several benefits of the DTI, including, “the ability to unambiguously link the tokenised instrument with the relevant blockchain where
the instrument is issued/traded/settled, which enables regulators to monitor DLT specific risks, and the ability to connect the ISINs pertaining to traditional financial instruments with their tokenised version”.
This shows DTIs are not just an additional layer of regulation, but a necessary tool for ensuring market integrity and transparency. Given ESMA’s crypto-asset regime, MiCA, already embeds the DTI as the identifier of choice for stablecoins and other unbacked
crypto-assets, the MiFIR proposal is just the latest step in a wider update of this standard within the EU.
Following ESMA’s consultation, the FCA also published its discussion paper on improving the UK’s transaction reporting regime where a key consideration is the inclusion of the DTI for tokenised securities. The rationale for inclusion is clear. According
to the FCA, the DTI “would enhance our market monitoring and allow us to monitor trading in tokenised securities more effectively. It will also give us clearer oversight of potential price discrepancies of tokenised securities that are available on multiple
blockchains.” Given the FCA already mandates ISINs, the DTI will act as a link between the DLT the token or tokens are stored on and the asset they represent.
To support these regulatory advancements and enable greater market competition, the Association of National Numbering Agencies (ANNA) and the Digital Token Identifier Foundation (DTIF) are collaborating to integrate DTIs into existing market practices seamlessly.
The partnership promises to revolutionise transparency and efficiency in the digital asset space.
A key objective of integrating the new DTI standard has been to provide new critical data for the digital asset market while minimising operational changes. In practice, this means ISIN:DTI mapping and parallel ISIN:DTI identifier code allocations. The linkage
already exists in the ISIN:DTI Register, available on both the ANNA and DTIF websites, which records all existing DLT financial instruments that have ISIN and DTI. The register includes more than 80 DLT-based securities, representing many highly publicised
digital bonds such as those from the EIB, Hong Kong Government and The World Bank.
To bring the new regulatory regimes to life, issuers of financial instruments will continue working with their National Numbering Agencies (NNAs) to obtain ISINs. To ensure seamless integration, DTIF will automatically allocate a corresponding DTI for DLT-related
instruments. This will be mapped to the ISIN and recorded in the ANNA Service Bureau and DTI Registry. Migration toward this fully operational, automated model will happen over the next 6 months.
Industry standards will continue to play a pivotal role in ensuring transparency, safety, and efficiency across both traditional and digital ecosystems, but as the adoption of digital assets grows, authorities must address the regulatory gaps posed by DLT.
By integrating DTIs into regulatory frameworks, ESMA and the FCA are setting a precedent for global best practices in digital asset oversight.