In recent weeks, a coalition of prominent financial institutions and market operators—including Nasdaq, Germany’s Börse Stuttgart, and several other leading exchanges—has formally appealed to the European Union to either lift the existing ceiling on tokenised assets in the EU’s sandbox trial or to raise it substantially. Their joint statement underscores a growing consensus among market participants that the current cap, which limits the total value of assets that can be tokenised within the pilot, is insufficient for the ambitions of Europe’s burgeoning digital‑finance ecosystem. ## Background to the EU Tokenisation Pilot The European Commission launched a sandbox‑style pilot in early 2023 to explore the regulatory, technical, and market‑infrastructure implications of tokenising real‑world assets.
The pilot permits authorised participants to issue digital tokens that represent ownership in a range of assets, from equities and bonds to real‑estate parcels and commodities. The overarching goal is to test whether tokenisation can increase market efficiency, broaden investor access, and reduce settlement times while preserving investor protection and market integrity. To manage risk during the experimental phase, the Commission imposed a monetary ceiling on the aggregate value of tokenised assets that could be issued under the pilot.
The exact figure—set at €2 billion at launch—was intended to be a cautious starting point, allowing regulators to monitor systemic implications without exposing the market to excessive exposure. ## Why the Current Cap Is Considered Too Low Nasdaq, Börse Stuttgart, and their partners argue that the €2 billion limit quickly becomes a bottleneck for several reasons: 1.
**Rapid Uptake of Tokenisation Projects**: Within the first twelve months, a number of European issuers already approached or surpassed the cap with single‑project token offerings. Notable examples include a €1.8 billion tokenised infrastructure fund in France and a €1.5 billion tokenised corporate bond issuance in the Netherlands. These projects demonstrate that demand far outstrips the current allowance. 2.
**Fragmented Market Liquidity**: A low cap forces participants to split larger asset pools into multiple smaller tokens, which dilutes liquidity and hampers the creation of deep, tradable markets. When investors see fragmented order books, they may be less inclined to participate, undermining one of the pilot’s core objectives.
3. **Innovation Stifling**: Many fintech firms and traditional banks are developing sophisticated token‑based products—such as fractional ownership platforms, cross‑border settlement solutions, and automated compliance layers—that require a larger pool of tokenised assets to achieve economies of scale. The cap limits their ability to test these innovations at a meaningful scale. 4.
**Competitive Disadvantage**: Outside the EU, jurisdictions like the United States, Singapore, and Switzerland have adopted more flexible approaches, allowing tokenised asset values in the tens of billions. A restrictive cap could drive issuers to seek regulatory environments elsewhere, potentially causing Europe to lose a strategic advantage in the global digital‑finance race. ## The Coalition’s Specific Requests The joint letter to the European Commission outlines two possible pathways: - **Option A – Removal of the Cap**: Eliminate the monetary ceiling entirely, allowing the pilot to operate without a predefined limit. The coalition suggests that existing risk‑mitigation tools—such as real‑time monitoring, mandatory reporting, and robust capital‑adequacy requirements for participants—provide sufficient safeguards.
- **Option B – Substantial Increase**: If removal is deemed premature, the coalition recommends raising the cap to at least €10 billion, a figure they argue aligns with the projected volume of tokenised assets for the next two to three years based on current market pipelines. Both options are accompanied by a commitment from the signatories to share data, conduct joint stress‑tests, and cooperate with regulators to ensure that systemic risk remains contained. ## Potential Benefits of Raising or Removing the Cap 1. **Enhanced Market Depth and Price Discovery**: Larger token pools would enable more robust secondary‑market activity, leading to tighter spreads and more accurate pricing of tokenised assets.
2. **Broader Investor Inclusion**: Higher‑value token offerings can be broken down into smaller, affordable units, opening participation to retail investors who might otherwise be excluded from high‑ticket‑size investments. 3. **Accelerated Technological Development**: With a larger sandbox, developers can trial advanced smart‑contract functionalities, automated compliance checks, and interoperable cross‑chain settlements, fostering a richer ecosystem of services.
4. **Alignment with EU Strategic Objectives**: The European Commission’s Digital Finance Strategy emphasizes the importance of fostering innovative financial services while maintaining stability. Adjusting the cap would be consistent with that strategic direction. ## Regulatory Considerations and Safeguards The coalition acknowledges that any adjustment must be paired with rigorous oversight.
Proposed safeguards include: - **Real‑Time Transaction Monitoring**: Deploying blockchain analytics tools to detect abnormal trading patterns or potential market abuse instantly. - **Enhanced Reporting Obligations**: Requiring token issuers to submit detailed periodic reports on token holder composition, asset backing, and redemption mechanisms. - **Capital Requirements**: Mandating that participating entities hold a proportionate amount of capital relative to the value of tokens they issue, mirroring traditional securities‑market standards. - **Consumer Protection Measures**: Implementing clear disclosure requirements, dispute‑resolution pathways, and investor‑education programmes to ensure participants understand the risks involved.
## Looking Ahead The coalition has set a deadline of 30 November 2026 for the Commission to respond to its proposal. In the interim, they plan to continue issuing tokenised assets within the existing cap, albeit at a reduced pace, to avoid disrupting ongoing projects. If the EU decides to raise or remove the cap, it could catalyse a wave of new tokenisation initiatives across Europe, positioning the region as a leader in the next generation of capital markets. Conversely, maintaining the status quo may slow momentum, potentially diverting innovative capital to more permissive jurisdictions.
Stakeholders—including investors, issuers, and regulators—will be watching the outcome closely, as the decision will likely shape the trajectory of Europe’s digital‑finance landscape for years to come.