EU tokenization companies push for DLT pilot changes amid US momentum

The European Union’s Digital Ledger Technology (DLT) Pilot Regime, designed to create a testing ground for tokenized financial instruments, is facing mounting pressure from domestic fintech and tokenization companies. These firms are demanding immediate regulatory adjustments, arguing that the current framework is too restrictive and threatens to undermine the EU’s global competitiveness as the United States accelerates its own momentum in digital asset adoption.

Industry organizations representing market infrastructure providers and issuers have submitted formal requests to the European Securities and Markets Authority (ESMA) and the European Commission, highlighting several key barriers to scaling. The primary concern revolves around the strict limitations on the total market value and volume of DLT financial instruments permitted within the pilot. Firms argue that the existing caps are insufficient to attract the institutional capital necessary for successful Real World Asset (RWA) tokenization and large-scale testing.

This push for liberalization comes amidst perceived regulatory advancement in the US. While the EU’s comprehensive Markets in Crypto Assets (MiCA) regulation offers broad clarity, the targeted nature of the US regulatory shifts—particularly around institutional tokenized fund products and potential clarity regarding security status—is seen as fostering a faster, more permissive environment for large financial players.

European companies are urging regulators to raise the market capitalization thresholds significantly and simplify the application process for obtaining DLT Pilot waivers. Furthermore, there is a call to streamline the process for obtaining necessary permissions under existing directives, such as MiFID II, to ensure a smoother transition from the pilot phase into full commercial operation. Failure to adapt the DLT Pilot quickly, firms warn, risks major European innovation and technological expertise migrating to jurisdictions offering higher ceilings for growth.

Source: EU tokenization companies push for DLT pilot changes amid US momentum