EU Tokenization Firms Sound Alarm: DLT Pilot Changes Urgently Needed as US Gains Critical Momentum

BRUSSELS, Belgium – February 2025: European tokenization companies are issuing a stark warning to EU lawmakers, urging immediate amendments to the bloc’s DLT Pilot Regime as regulatory momentum in the United States threatens to permanently shift blockchain-based capital markets across the Atlantic. This urgent call comes amid growing concerns that Europe’s current regulatory constraints could undermine the euro’s competitiveness in global finance.

European Tokenization Companies Demand Regulatory Quick Fix

A coalition of leading European tokenization operators has delivered a joint letter to EU policymakers ahead of crucial parliamentary debates. The group, including Securitize, 21X, Boerse Stuttgart Group, Lise, OpenBrick, STX, and Axiology, argues that current limitations within the DLT Pilot Regime are preventing regulated onchain markets from achieving meaningful scale. Consequently, they emphasize that Europe risks losing market relevance as the United States advances toward industrial-scale tokenization.

The companies specifically highlight three problematic constraints:

• Asset limits that restrict the types of securities eligible for tokenization
• Volume caps that prevent products from reaching institutional scale
• Time-limited licenses that expire after six years, creating uncertainty for long-term investment

Rather than seeking deregulation, the coalition proposes targeted technical adjustments that would maintain existing investor protections while enabling European markets to compete effectively. They suggest expanding eligible assets, raising issuance caps, and removing the six-year license limitation to allow operators to scale products already operational in other jurisdictions.

US Regulatory Framework Advances Rapidly

While Europe debates regulatory adjustments, the United States has made significant strides in establishing clear frameworks for tokenized securities. On December 11, 2025, the Securities and Exchange Commission’s Trading and Markets Division provided crucial guidance on how broker-dealers can custody tokenized stocks and bonds under existing customer protection rules. This clarification signaled that blockchain-based securities would operate within traditional regulatory frameworks rather than as entirely new asset classes.

The SEC simultaneously issued a no-action letter to a Depository Trust & Clearing Corporation subsidiary, authorizing a new securities market tokenization service. DTCC confirmed that its Depository Trust Company unit would launch a service tokenizing real-world assets already held in DTC custody, representing a major institutional endorsement of blockchain infrastructure.

Exchange Infrastructure Developments

Major US exchanges are actively developing tokenization platforms within traditional market infrastructure. Nasdaq has identified securing SEC approval for its September proposal to list tokenized stocks as a top priority, while the New York Stock Exchange announced on January 17 that it is developing a platform to trade tokenized stocks and exchange-traded funds. This platform would support 24/7 trading and near-instant settlement using blockchain-based post-trade systems, pending regulatory approval.

The SEC further clarified its regulatory approach on January 28 by distinguishing between tokenized securities created by issuers and those tokenized by unaffiliated third parties. This distinction provides companies with clearer regulatory footing as tokenization activity expands across traditional financial markets.

Strategic Implications for European Markets

The European companies warn that “global liquidity will not wait” if Europe remains constrained by current regulatory limitations. They emphasize that prolonged delays risk creating not just a temporary setback but a critical strategic vulnerability. The structural inertia of broader EU market reforms could delay effective application until at least 2030, creating a multi-year competitive gap that US markets could exploit.

This regulatory divergence has significant implications for settlement and issuance activity, which increasingly favors faster, fully digital market infrastructure. As onchain settlement systems mature globally, capital naturally migrates toward jurisdictions offering the most efficient regulatory environments and technological frameworks.

The Euro’s Competitive Position at Stake

Beyond market share concerns, the companies highlight broader implications for the euro’s role in global capital markets. As settlement and issuance activity shifts toward faster digital infrastructure, jurisdictions with outdated or restrictive frameworks risk diminishing currency competitiveness. The ability to attract and retain global liquidity depends increasingly on regulatory agility and technological integration.

European operators emphasize that their proposed adjustments could be adopted quickly through a standalone technical update without reopening the EU’s broader market-structure reforms. This approach would demonstrate regulatory responsiveness while maintaining the bloc’s commitment to investor protection and financial stability.

Global Tokenization Trends

The value of global tokenized real-world assets continues to grow exponentially, with institutional participation increasing across multiple asset classes. According to industry data from RWA.xyz, tokenization of traditional assets represents one of blockchain technology’s most promising applications for mainstream finance. This growth creates competitive pressure for regulatory frameworks that can support innovation while ensuring market integrity.

Conclusion

European tokenization companies face a critical juncture as US regulatory momentum accelerates. The urgent call for DLT Pilot Regime amendments reflects growing concern that Europe’s current approach may insufficiently support the scaling of regulated onchain markets. Without timely action, the EU risks losing market relevance and potentially weakening the euro’s competitiveness in global capital markets. The proposed technical adjustments offer a balanced path forward, maintaining investor protections while enabling European markets to compete effectively in the rapidly evolving landscape of tokenized securities and blockchain-based financial infrastructure.

FAQs

Q1: What is the DLT Pilot Regime?
The DLT Pilot Regime is the European Union’s regulatory sandbox for tokenized securities markets, designed to test distributed ledger technology in controlled environments while maintaining investor protections.

Q2: Why are European companies concerned about US momentum?
US regulators and exchanges are rapidly developing clear frameworks for tokenized securities, potentially attracting global liquidity and innovation away from European markets if the EU maintains restrictive constraints.

Q3: What specific changes are European companies requesting?
They seek expanded asset eligibility, higher issuance caps, and removal of the six-year license limitation within the DLT Pilot Regime to enable scaling of regulated tokenized products.

Q4: How does tokenization benefit traditional financial markets?
Tokenization enables faster settlement, increased liquidity, fractional ownership, and operational efficiency through blockchain-based infrastructure while operating within existing regulatory frameworks.

Q5: What are the risks of regulatory delay for Europe?
Prolonged delays risk creating strategic vulnerabilities, potentially diminishing the euro’s competitiveness and causing permanent migration of market activity to jurisdictions with more advanced regulatory frameworks.