In recent weeks, a coalition of leading financial institutions and market operators—including Nasdaq, the Stuttgart Stock Exchange (Boerse Stuttgart), and a number of other prominent participants—has formally appealed to the European Union to either eliminate or substantially increase the current ceiling that governs the tokenisation pilot programme. This request stems from a growing consensus among the coalition members that the existing limit, which was originally set as a cautious safeguard during the early phases of digital asset experimentation, now acts as a bottleneck that could stifle innovation, limit market depth, and impede the broader adoption of tokenised securities across the continent.
The tokenisation pilot, launched by the EU as part of its broader digital finance strategy, was designed to test the feasibility of issuing, trading, and settling tokenised assets on distributed ledger technology (DLT) platforms. The pilot’s initial parameters included a strict cap on the total market value of tokenised securities that could be issued under the scheme. This ceiling was intended to allow regulators to monitor systemic risk, ensure investor protection, and gather data on operational challenges without exposing the financial system to undue volatility.
However, as the pilot has progressed, several projects have already approached, and in some cases exceeded, the stipulated limit. Notable examples include cross‑border tokenised bond offerings, fractional equity tokenisation of mid‑cap companies, and the issuance of tokenised real‑estate investment trusts (REITs) that have attracted significant institutional interest. The coalition argues that these early successes demonstrate both the demand for tokenised products and the capacity of DLT infrastructures to handle larger volumes than originally anticipated. In a joint statement released earlier this month, the coalition highlighted three primary concerns with maintaining the status quo: 1.
**Constraining Market Liquidity** – The cap restricts the total amount of capital that can flow into tokenised assets, which in turn limits the depth of order books and reduces the attractiveness of these instruments for large‑scale investors. Liquidity is a cornerstone of any healthy market, and without sufficient volume, tokenised securities risk being perceived as niche or experimental rather than mainstream.
2. **Hindering Innovation and Scale‑Up** – Start‑ups and fintech firms that have built sophisticated tokenisation platforms are finding it increasingly difficult to expand their offerings beyond pilot‑size projects.
The cap discourages them from seeking additional funding or partnering with larger issuers, thereby slowing down the development of ancillary services such as token custody, compliance tooling, and secondary‑market trading solutions. 3.
**Creating an Unlevel Playing Field** – While the EU’s pilot aims to foster a uniform regulatory environment, the cap inadvertently favours jurisdictions outside Europe where regulatory thresholds are higher or non‑existent. This could drive issuers to list tokenised securities on foreign exchanges, undermining the EU’s ambition to become a global hub for digital finance. To address these issues, the coalition proposes two possible pathways: - **Full Removal of the Cap** – Eliminating the ceiling altogether would allow the market to self‑regulate based on demand, risk management practices, and existing supervisory frameworks. Proponents argue that existing EU financial regulations—such as MiFID II, the Markets in Crypto‑Assets Regulation (MiCAR), and the European Market Infrastructure Regulation (EMIR)—already provide sufficient oversight to manage systemic risk, even in a larger tokenised market.
- **Significant Increase of the Threshold** – If a complete removal is deemed too abrupt, the coalition suggests raising the cap to a level that reflects current market activity and projected growth. They recommend a tiered approach where the limit can be adjusted annually based on quantitative metrics such as total issuance volume, market participation rates, and risk assessment outcomes.
The coalition’s appeal has sparked a lively debate among EU policymakers, regulators, and industry stakeholders. Some regulators acknowledge the need for flexibility but caution that any change must be accompanied by robust monitoring mechanisms.
They emphasize the importance of maintaining investor protection, especially for retail participants who may be less familiar with the nuances of tokenised assets. In response, the European Commission has indicated that it will conduct a comprehensive review of the pilot’s parameters, taking into account the coalition’s feedback, empirical data gathered during the trial, and broader strategic objectives for the EU’s digital finance agenda.
The Commission’s forthcoming assessment is expected to explore how a revised cap—or its removal—could align with the EU’s goals of enhancing market competitiveness, fostering financial innovation, and ensuring a resilient regulatory environment. Beyond the immediate regulatory considerations, the coalition also underscores the broader economic implications of a more permissive tokenisation framework. By enabling larger issuances, the EU could unlock new sources of capital for SMEs, facilitate more efficient cross‑border investment, and promote greater financial inclusion through fractional ownership models.
Moreover, a thriving tokenised market could attract foreign direct investment, as global investors seek diversified exposure to European assets that are digitised, transparent, and easily tradable. In summary, the request from Nasdaq, Boerse Stuttgart, and their partners reflects a pivotal moment in the evolution of Europe’s digital asset ecosystem.
The current cap, once a prudent safeguard, now appears increasingly misaligned with the pace of innovation and market demand. Whether the EU decides to lift the ceiling entirely or adjust it upward, the outcome will shape the trajectory of tokenisation in Europe for years to come, influencing everything from capital formation to the everyday experience of investors navigating the new frontier of digital securities.