Digital Asset Firms Urge EU to Act Fast on Tokenization Rules

TLDR

• Digital asset firms warn that the EU risks falling behind the U.S. in tokenization and blockchain technology.
• The EU’s current tokenization framework faces limitations that could stifle innovation and slow market growth.
• The U.S. has already advanced with tokenized securities, with plans for T+0 instant settlement by 2026.
• Firms urge the EU to raise transaction volume caps and remove restrictions on tokenized assets to stay competitive.
• If the EU doesn’t act quickly, the U.S. could dominate the global digital asset market, leaving Europe behind.

A group of digital asset firms has raised concerns that Europe could lose its early lead in tokenization. In a letter to policymakers, the firms argue that the EU’s current regulatory approach is lagging behind the U.S., which is moving quickly on blockchain and tokenized assets. With the U.S. taking decisive steps, the EU risks falling behind in the race to modernize capital markets.

EU’s Tokenization Framework Faces Constraints

The EU introduced the Distributed Ledger Technology (DLT) Pilot Regime to regulate tokenized assets but has imposed cautious limits. These restrictions, including a cap on transaction volumes and the types of assets that can be tokenized, are seen as barriers to growth. A group of eight EU-regulated firms, including Securitize, 21X, and Boerse Stuttgart Group’s Seturion, warn that the EU’s approach may stifle innovation.

The firms call for urgent changes to allow more flexibility and accelerate the tokenization process. They suggest raising the transaction volume cap from €6 billion to €100 billion and removing restrictions on the types of assets eligible for tokenization. The letter emphasizes that without swift action, Europe could lose its competitive edge in the global market for tokenized financial infrastructure.

U.S. Moving Fast to Dominate Digital Capital Markets

Meanwhile, the U.S. is advancing rapidly in the tokenization space. The U.S. Securities and Exchange Commission (SEC) has already granted a no-action letter to the DTCC, enabling tokenized settlements to move forward. This clears the path for full-scale tokenization of financial markets, potentially with T+0 (instant settlement) in place by 2026.

Leading U.S. exchanges, including Nasdaq and the New York Stock Exchange, have already laid out plans for tokenized securities. Furthermore, CME Group, in partnership with Google, is working on a tokenized cash collateral project. The developments in the U.S. suggest that it is positioning itself to dominate the future global economy, leaving Europe to catch up.

Urgent Call for Action to Secure EU’s Future in Tokenization

In light of these developments, the group of digital asset firms has urged the EU to make swift regulatory changes. They propose extending the DLT Pilot Regime to allow for larger transaction volumes and a wider variety of tokenized assets. The firms also recommend removing the six-year limitation on licenses, a move they believe will help retain Europe’s competitive edge.

The firms warn that if Europe does not act now, the U.S. will have a four-year head start in tokenized capital markets. As U.S. exchanges move forward with tokenized securities, Europe risks losing its chance to lead in the future of finance.

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