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FollowingThe European Alliance of Financial and Tokenization Groups calls on EU lawmakers to lift or significantly increase the cap on tokenized financial instruments
The alliance of multiple European financial institutions and tokenization groups urges EU lawmakers to either cancel the proposed 100 billion euro (approximately US$116.3 billion) cap on the size of tokenized financial instruments or increase it to at least 500 billion euros. The draft letter, dated September 7 and sent to members of the European Council and the European Parliament's Economic and Monetary Affairs Committee, stated that if lawmakers decide to retain the cap, then 500 billion euros should be used as the benchmark threshold.
Institutions signing the letter include Nasdaq, Boerse Stuttgart Group, Securitize, the European Ethereum Institute and Axiology. The letter pointed out that some existing European projects have reached 350 billion euros in size and are planned for further expansion, so it is believed that the proposed 100 billion euro cap will appear overstretched.
The groups compared the EU's proposed restrictions with the situation in the United States, pointing out that in the United States,"a dominant clearing platform is capable of tokenizing U.S. stocks and other assets without a trading volume cap," with assets that can cover up to US$150 trillion. They believe that the EU's restrictions are too strict by comparison.
European financial group calls for lifting of distributed ledger technology (DLT) regime cap
As part of its Market Integration and Regulation Package, the European Commission proposes to increase the current € 6 billion limit to a maximum of € 100 billion, which includes revisions to the distributed ledger technology (DLT) pilot regimes. The DLT pilot system, which takes effect in 2023, allows financial companies to test the trading and settlement of assets such as stocks and bonds based on blockchain without exemptions from certain EU financial rules.
Theletter emphasizes that the above threshold applies to the market value of financial instruments allowed to enter the DLT infrastructure, not their trading volume. As a result, the proposed € 100 billion cap appears relatively small compared to global stock markets.
European companies step up pressure on DLT rules
The letter comes after months of pressure from financial and tokenization companies seeking to change the EU's DLT pilot system. In April this year, 39 financial institutions and industry groups, including the Nasdaq and Stuttgart stock exchanges, urged EU policymakers to speed up the revision of the DLT pilot system and increase its overall cap to between 100 billion and 150 billion euros. The April letter also called for expanding the scope of eligible assets and lifting the time limit for issuing licenses under the system.
This April action follows February's Tokenization and similar calls from market infrastructure companies, including Securitize, 21X and the Stuttgart Stock Exchange. It was warned at the time that existing asset limits, trading volume caps and time-limited licenses were hindering the expansion of regulated chain markets in Europe.
The February warning noted that without faster reform measures, liquidity could flow to the U.S. market as U.S. regulators move towards larger tokenization and on-chain settlements.
Currently, the total value of distributed real-world assets (RWAs) is approximately US$39.15 billion, of which U.S. Treasury bonds are the largest category, accounting for approximately US$15.8 billion.
