The European Union is falling behind in the adoption of blockchain technology, most pressingly tokenization or digital securities.
Everyone acknowledges that digital securities are the future. A growing number of innovators and established financial services are utilizing or reviewing tokenized securities.
Last month, the New York Stock Exchange (NYSE:ICE) announced plans to offer tokenized assets including 24/7 trading in traditional securities, newly issued tokens, and ETFs. It will also offer fractional share trading, a service that is popular on more modern brokerages.
After four years of stasis and stifled innovation, the Trump Administration has embraced digital asset innovation. The Securities and Exchange Commission is working with the industry to update rules to accommodate tokenization. Last month, the SEC issued a welcomed statement on tokenization clarifying the regulator’s approach to the different types of digital assets.
This past week, a group of industry insiders issued a public statement sharing their concern with regard to Europe’s lack of progress on tokenization. Addressed to the members of the Commission, European Parliament, Council and all member states, the group warned the “EU risks losing market relevance.”
To quote the letter:
“While Europe deliberates, the U.S. has already acted and is on track to own the digital rails of the future global economy. Through measures such as the SEC’s No-Action Letter to DTCC, the U.S. has enabled industrial-scale tokenization, with a fully digital, T+0 settlement market expected by 2026.”
While the European Market Integration and Supervision Package (MISP) is said to provide the right “vision” greater urgency and speed is needed.
The group advocates for the following changes:
- Expansion of the scope of eligible assets and relevant thresholds to cover all financial instruments
- Increase the volume cap from a restrictive EUR 6 – 9 billion at least to a competitive EUR 100 – 150 billion
- Removal of the six-year limitation on the licenses
As the group asks to preserve the EU’s relevance and not be encumbered by ” a well-designed experiment ultimately curtailed by legislative delay.”
The founder and CEO of Tokenovate, Richard Baker, shared a statement on the EU’s clumsy approach to tokenization.
“European tokenisation firms are right to push for faster reform, because tokenised markets only work when the infrastructure around them evolves too. Settlement, legal finality, risk and liquidity management are where tokenised markets either succeed or stall, particularly as timelines compress and markets move toward T1 and T0 settlement,” says Baker. “As the US moves from pilots into production with clearer regulatory signals, the risk for Europe is that market infrastructure remains constrained by frameworks designed for experimentation rather than scale. To stay competitive, reform needs to focus on automating the post-trade lifecycle end to end, supported by shared standards such as the Common Domain Model, which provide the semantic layer needed to make tokenised settlement interoperable, legally sound and scalable.”
The European market has earned a reputation as having an inability to innovate, encumbered by excessive regulation. Whether valid or not, the EU should be matching, if not beating, America’s pace of adopting digital assets and blockchain technology. The choice should be clear.
Editors Note: the signees of the letter include: Marius Jurgilas – Axiology DLT UAB, Mark Kepeneghian – Lise SA, Javier Tordable – Bit2Me STX, Max Heinz – 21X AG, Amparo Garcia Flores – Securitize Europe, David Martin – OpenBrick, Ondrej Dusilek – Central Securities Depository, Lida Kurt – Seturion by Boerse Stuttgart Group.
