European tokenization companies are urging EU policymakers to expedite amendments to the bloc’s Distributed Ledger Technology (DLT) Pilot Regime, warning that current limits on scope and scale are hindering onchain market development and could push activity to the United States.
Industry seeks changes to the DLT Pilot
The EU’s DLT Pilot Regime, in force since 2023, is a regulatory sandbox that allows trading and settlement of tokenized financial instruments—such as equities, bonds, and fund shares—on blockchain under specific exemptions. Companies say caps on market size, narrow eligibility for instruments, and operational constraints are preventing pilots from moving beyond limited trials and are making it difficult to onboard institutional participants.
Firms are calling for higher thresholds, broader instrument coverage, clearer supervisory expectations, and a defined pathway from pilot operations to full authorization under existing securities rules.
Why tokenization matters for EU markets
Tokenization refers to issuing traditional financial instruments as blockchain-based tokens, enabling programmable compliance, near-instant settlement, and streamlined post-trade processes. Proponents argue that a more flexible EU regime could reduce costs, improve market efficiency, and support the bloc’s capital markets objectives. Without adjustments, they warn, liquidity and product innovation may migrate to jurisdictions with more permissive frameworks.
US momentum adds competitive pressure
Market participants point to growing onchain activity in the United States, including the rise of tokenized Treasury products and expanding broker-dealer and alternative trading system initiatives that support tokenized securities within existing rules. Industry leaders argue the EU risks ceding ground if the DLT Pilot remains tightly constrained.
What to watch
EU institutions are expected to continue assessing feedback on the DLT Pilot as part of broader digital finance work. Potential adjustments could address market size thresholds, instrument scope, operational requirements, and interoperability with MiCA and existing securities legislation. Until changes are clarified, firms say uncertainty is delaying investment and scaling plans for onchain market infrastructure in Europe.