The race to modernize capital markets with blockchain is heating up — and Europe could be blowing its early lead to the U.S., a group of blockchain firms warned in a Thursday letter.

Eight EU-regulated digital asset firms — Securitize, 21X, Boerse Stuttgart Group's Seturion, Central Securities Depository, Lise, OpenBrick, STX and Axiology — are urging policymakers to fast-track changes to the bloc’s distributed ledger technology Pilot Regime, saying that current limitations are holding the region back just as the U.S. begins to move decisively.

"While Europe deliberates, the U.S. has already acted and is on track to own the digital rails of the future global economy," the firms said in the letter.

Tokenization refers to the process of issuing real-world assets like stocks, bonds or funds as blockchain-based tokens. Industry backers see it as a way to dramatically improve settlement speeds, increase transparency and unlock fractional ownership. It's potentially a huge market: several reports project that tokenized assets could swell to multiple trillion dollars over the few next years.

The EU was among the early movers to introduce a legal framework for tokenized financial infrastructure, but its regulatory sandbox — the DLT Pilot Regime — was designed with cautious limits. The firms behind the letter argue that those limits now risk turning the EU’s tokenization lead into a "success trap," while the U.S. is advancing fast.

The U.S. Securities and Exchange Commission (SEC) recently granted a no-action letter to the DTCC, the nation's largest settlement firm, clearing the way for full-scale tokenized settlement. A T+0 (instant settlement) market could be live in the U.S. as soon as 2026, with exchange operators Nasdaq and New York Stock Exchange having laid out plans for around-the-clock trading with tokenized securities. CME Group, which operates a key derivatives trading venue for Wall Street firms, is collaborating with Google on a tokenized cash collateral with plans to launch later this year.

That would give the U.S. a four-year head start before the EU’s broader Market Integration and Supervision Package (MISP) takes full effect by 2030, the letter warned.

The group proposed changes to the framework to avoid this scenario. That includes removing restrictions around what assets can be tokenized, raising the transaction volume cap to €100 billion to €150 billion from the pilot's €6 billion to €9 billion limit and eliminating the six-year limitation on licenses.

"If Europe remains constrained until 2030, global liquidity will not wait — it will migrate permanently to U.S. markets, undermining also the euro’s competitiveness through regulation rather than technology," the letter said. "The EU must act now to avoid repeating the mistakes of its capital markets history."