European Finance Groups Push for €500 Billion Tokenized Securities Limit

European financial and tokenization groups are urging EU lawmakers to dramatically expand the scale at which regulated tokenized securities can operate in Europe, arguing that the bloc risks limiting the growth of its digital capital markets before they reach meaningful scale.

A coalition of financial-market and tokenization companies has called on European policymakers to remove the proposed cap on tokenized financial instruments altogether or, if a limit remains, raise it to at least €500 billion.

The request was made in a letter dated September 7 and addressed to members of the European Council and the European Parliament's Economic and Monetary Affairs Committee. Signatories cited in the industry campaign include Nasdaq, Boerse Stuttgart Group, Securitize, the European Ethereum Institute and Axiology.

Europe Wants to Scale Tokenized Securities

The dispute centres on the EU's Distributed Ledger Technology (DLT) Pilot Regime, which allows regulated market participants to test blockchain-based trading and settlement of financial instruments such as shares and bonds.

The regime began in 2023 as a regulatory framework for experimentation with distributed-ledger technology. The European Commission now wants to make it more flexible and scalable as part of its wider Market Integration and Supervision Package and the Savings and Investments Union.

Under the Commission's proposal, the current aggregate threshold of €6 billion would rise to €100 billion. Product-specific limits would also be removed, while smaller DLT operators would have access to a simplified regime subject to a €10 billion threshold.

Industry groups argue that even €100 billion may not be enough.

According to the coalition behind the September letter, some European tokenization projects are already approaching €350 billion in scale, with further expansion planned. The groups therefore want €500 billion to become the minimum if lawmakers decide that a cap is necessary.

Why the €500 Billion Threshold Matters

The debate is not simply about the amount of securities that can be traded on blockchain infrastructure.

The proposed EU threshold is calculated using the market value of financial instruments admitted to trading or recorded on DLT infrastructure, rather than trading volume. That means the ceiling can become binding even if the actual amount of transactions taking place on the platform remains relatively modest.

For banks, exchanges, asset managers and fintech companies investing in tokenization infrastructure, the regulatory ceiling therefore becomes a question of long-term business viability.

If market participants believe that European DLT infrastructure will quickly hit regulatory limits, they may have less incentive to build trading, custody, settlement and issuance systems in the EU.

The industry's argument is that Europe should create enough regulatory headroom now rather than repeatedly increase the ceiling as the market grows.

A Competition Issue for European Capital Markets

The discussion also reflects a broader European concern: the competitiveness of the bloc's capital markets.

The European Commission has repeatedly highlighted the fragmentation and relatively small scale of EU financial markets compared with the United States. Its Market Integration and Supervision Package is designed to remove barriers to cross-border investment and improve the ability of European capital markets to finance businesses and innovation.

Tokenization could become part of that strategy.

By recording ownership and transactions on distributed ledgers, financial institutions could potentially streamline settlement, reduce some post-trade processes and create new ways of issuing and distributing securities.

The ECB has also described the review of the DLT Pilot Regime as an opportunity to improve flexibility, proportionality and scalability in European digital capital markets.

Europe Faces a Strategic Choice

The industry coalition has compared Europe's proposed framework with the United States, arguing that American infrastructure could support tokenization at a much larger scale.

The comparison should be treated as an industry argument rather than a settled assessment of the two regulatory systems. But it highlights a genuine strategic question for European policymakers: how much regulatory flexibility is needed to allow blockchain-based capital markets to develop without compromising investor protection and financial stability?

That balance will become increasingly important as tokenization moves beyond experimental projects.

Recent developments already show that regulated financial institutions are exploring tokenized securities for real-world applications. Securitize and Socios.com, for example, are developing regulated tokenized equity offerings involving minority stakes in professional sports teams, with the project expected to use Securitize's European trading and settlement infrastructure under the DLT Pilot Regime.

What Comes Next for EU Tokenization

The European Parliament and EU member states will now have to negotiate the final shape of the DLT reforms.

The central question is whether the Commission's proposed €100 billion ceiling will survive, whether lawmakers will raise it substantially, or whether the aggregate limit will eventually be removed.

For Europe's banks, exchanges and fintech companies, the decision could help determine whether tokenized securities remain a controlled regulatory experiment or become part of mainstream European market infrastructure.

For EuroBankingNews readers, the bigger issue is capital-market competitiveness. If Europe succeeds in combining strong investor protection with sufficient room for digital securities to scale, tokenization could become another building block of a more integrated European financial market.

Source: KuCoin/Crypto Breaking, European Commission, EUR-Lex, ECB