In recent weeks, a coalition of leading financial market participants—including Nasdaq, the Stuttgart Stock Exchange (Börse Stuttgart), and a range of other prominent institutions—has formally appealed to European Union regulators to either remove the existing ceiling on tokenisation activities or to increase it substantially. This request emerges from growing concerns that the current cap, which was introduced as a precautionary measure during the early stages of the EU’s tokenisation trial, is now acting as a bottleneck that hampers innovation, limits market liquidity, and restricts the full deployment of blockchain‑based financial products across the continent.
The tokenisation trial, launched by the European Commission in 2022, was designed to test the feasibility of representing real‑world assets—such as equities, bonds, real estate, and even commodities—as digital tokens on distributed ledger technology (DLT) platforms. The trial’s overarching goal was to assess whether tokenised assets could improve settlement times, reduce transaction costs, and broaden access to capital markets for a wider set of investors. To manage risk during this experimental phase, regulators imposed a provisional cap on the total market value of assets that could be tokenised within the pilot, setting the limit at a relatively modest €1 billion.
While the cap was initially justified as a safeguard against potential systemic risks and to allow regulators to gather data in a controlled environment, the participating firms now argue that the threshold no longer reflects the realities of the market. According to the coalition’s joint statement, several pilot projects have already reached, and in some cases exceeded, the €1 billion mark. These projects span a variety of asset classes, from tokenised corporate bonds issued by mid‑size European issuers to fractional ownership tokens for high‑value real‑estate assets in major cities such as Berlin, Paris, and Milan.
The coalition points out that the cap is not only limiting the scale of these initiatives but also discouraging new entrants who might otherwise contribute to a vibrant, competitive ecosystem. "The current ceiling is simply too low to accommodate the pace at which the market is evolving," said a senior executive from Nasdaq, speaking on behalf of the group. "We have witnessed a surge in demand from institutional investors who are eager to explore tokenised securities as a means to diversify their portfolios and achieve greater operational efficiency. By keeping the cap at its present level, the EU risks stifling innovation and losing its competitive edge to other jurisdictions that have adopted more flexible regulatory frameworks." The coalition’s appeal is grounded in several key arguments: 1.
**Market Demand and Growth**: Data from the pilot indicates that the volume of tokenised assets under management has been growing at an annual rate of roughly 45 % since the trial’s inception. This rapid expansion suggests that the market is ready for a larger scale, and that the cap is now a constraint rather than a protective measure. 2.
**Risk Management Capabilities**: Participants highlight that modern DLT platforms incorporate advanced risk‑mitigation features, such as real‑time monitoring, automated compliance checks, and robust smart‑contract governance. These tools enable regulators to oversee tokenised transactions more effectively than traditional legacy systems.
3. **International Competition**: Countries like Singapore, Switzerland, and the United Arab Emirates have already implemented more permissive tokenisation regimes, attracting a wave of cross‑border investment and positioning themselves as global hubs for digital asset innovation. The EU’s restrictive cap could lead to a migration of talent and capital away from Europe. 4.
**Economic Benefits**: Expanding the cap—or removing it altogether—could unlock significant economic value. Estimates from the coalition’s internal analysis suggest that a ten‑fold increase in tokenised asset volume could generate upwards of €5 billion in additional economic activity annually, driven by new financing opportunities, increased market efficiency, and the creation of ancillary services such as token custody and compliance solutions. In response to these points, the coalition has proposed two possible regulatory pathways: - **Option A: Removal of the Cap** – This approach would eliminate the numerical ceiling, allowing market participants to tokenise assets up to the full extent of demand, subject to existing AML/KYC and investor protection requirements.
- **Option B: Gradual Increase** – If outright removal is deemed too abrupt, the coalition suggests a phased increase, for example raising the cap to €5 billion in the next twelve months and reassessing the impact before further adjustments. Both options are accompanied by a set of recommended safeguards, including mandatory reporting of tokenised asset volumes, periodic stress‑testing of DLT infrastructures, and the establishment of a dedicated supervisory unit within the European Securities and Markets Authority (ESMA) to monitor systemic risk. The EU’s response to this request will be closely watched by stakeholders across the financial sector.
Proponents of a higher cap argue that it will accelerate the integration of tokenisation into mainstream capital markets, fostering greater inclusivity and opening new avenues for financing sustainable projects, such as green bonds and climate‑focused investment vehicles. Critics, however, caution that rapid expansion without adequate oversight could expose the market to fraud, market manipulation, and operational failures.
Nevertheless, the coalition remains confident that a balanced approach—combining a higher cap with robust supervisory mechanisms—will enable Europe to lead the next wave of financial innovation while safeguarding investor interests. As the dialogue continues, the forthcoming decisions by EU policymakers will likely shape the trajectory of tokenised finance in Europe for years to come.