Europe’s push to build regulated onchain capital markets is running into a critical bottleneck, according to a group of tokenization and market infrastructure operators who warn that existing EU rules are blocking growth just as global competition accelerates.
Key Takeaways
European tokenization firms warn current EU rules are preventing onchain markets from scaling as global competition accelerates.
Issuance caps, asset limits and temporary licenses are pushing liquidity and activity toward faster-moving jurisdictions.
Without quick technical fixes, Europe risks losing long-term relevance in digital capital markets.
In a coordinated appeal to lawmakers ahead of a parliamentary debate, the group said the EU’s current framework for tokenized securities has failed to keep pace with the rapid move toward digital issuance and near-instant settlement. While other jurisdictions are transitioning from experimentation to live deployment, Europe remains constrained by rules designed for small-scale testing.
Sandbox Rules Prevent Markets From Scaling
According to the operators, caps on issuance size, narrow asset eligibility and temporary operating permissions are preventing regulated platforms from expanding products that already operate under real market conditions elsewhere. What was originally intended as a pilot environment has effectively become a barrier to growth.
The group warned that the timing of the regulatory bottleneck is particularly damaging. As settlement cycles compress and tokenized infrastructure matures, capital and trading activity are becoming increasingly mobile. Jurisdictions that support faster, fully digital processes are gaining an advantage, while constrained markets risk losing relevance.
While acknowledging that the EU’s broader market integration reforms point in the right direction, the operators cautioned that delayed implementation undermines their impact. With key elements unlikely to take effect until late in the decade, Europe risks missing the period when global standards for onchain markets are being set.
Proposal Focuses on Targeted Adjustments
Rather than calling for deregulation, the group proposed narrow technical updates to the existing framework. Their suggestions include expanding the range of eligible tokenized assets, raising issuance thresholds and removing time limits on pilot licenses, while keeping investor protections intact.
Beyond individual projects, the warning carries broader implications for Europe’s financial competitiveness. As issuance, trading and settlement increasingly shift to digital infrastructure, prolonged delays could lead to a permanent loss of market activity and weaken Europe’s position in global capital markets.
