Leading financial and tokenization-focused organizations in Europe are calling for the European Union to either remove the proposed 100 billion euro cap on tokenized financial instruments or significantly increase it. According to industry stakeholders, the current draft limits do not align with growth ambitions in the European market.
Is the Proposed Cap Sufficient?
A draft letter dated September 7 was sent to members of the EU Council and the European Parliament’s Economic and Monetary Affairs Committee. In it, the signatories argue that if a cap must be maintained, then it should be no less than 500 billion euros.
The letter was signed by industry heavyweights like Nasdaq, Boerse Stuttgart Group, Securitize, the European Ethereum Institute, and Axiology. Global trading and market technology giant, Nasdaq, emerges as a noteworthy advocate.
“There are already projects in Europe with a scope of 350 billion euros aiming for continued growth, proving that a 100 billion euro cap would be restrictive,” argues the coalition.
Industry representatives indicate that the proposed cap pertains to the market value of financial instruments eligible under DLT infrastructure rather than transaction volume. This 100 billion euro threshold is considered limited when compared to the size of global stock markets.
Can Europe Compete with the US?
The flexibility of the U.S. model is highlighted in the letter. The signatories note that in the U.S., a dominant trading platform can tokenize equities and other assets without volume limits, covering an asset universe that extends to 150 trillion euros.
The European Commission’s recommendation is to increase the current 6 billion euro cap to 100 billion euros under the Markets in Crypto-Assets Regulation. This package also encompasses amendments to the Distributed Ledger Technology (DLT) Pilot Regime.
Introduced in 2023, the DLT Pilot Regime allows financial institutions to test blockchain-based trading and settlement of assets such as stocks and bonds, while exempt from some EU financial rules.
- Key financial and tokenization institutions are advocating for increased or removed caps on tokenized financial instruments in the EU.
- The DLT Pilot Regime offers blockchain-based trading tests without complying with some EU financial rules.
- U.S. competition is fostering pressure on the EU to adopt more flexible tokenization limits.
The persistent advocacy from the financial sector is not new. Back in April, a coalition of 39 financial entities, including Nasdaq and Boerse Stuttgart, requested immediate reforms to the DLT Pilot Regime and an expansion of the total cap to a range of 100 to 150 billion euros. A similar call in February, driven by groups like Securitize and 21X, warned that current asset limits and temporary licenses hinder the scale of regulated on-chain markets in Europe and risk liquidity migrating to U.S. markets.
