A coalition of 39 financial institutions is calling on the European Commission to accelerate the Distributed Ledger Technology (DLT) pilot regime, pushing for higher thresholds, broader eligible assets, and fewer restrictions on experimentation. As tokenisation gains momentum in Europe, what does it really mean for financial markets and is regulation keeping up?
Our expert’s take: Andrew Steadman, Chief Product Officer at SBS
What is financial asset tokenisation, and why is it considered a transformative innovation for modern financial markets?
Tokenisation of financial assets is widely discussed, but what does it actually mean and why is it seen as transformative? At its core, tokenisation is simply the digital representation of an asset that would traditionally have been held in an account. Money, shares and bills of lading are all examples: once paper-based, then digitised, and now increasingly tokenised.
The real shift lies in how quickly ownership can be transferred and the level of certainty that comes with that transfer. In some cases, it can happen almost instantly. Payments, of course, have already become significantly faster with the rise of instant payment systems, raising the question of whether tokenising money for everyday use adds much value. For more complex financial instruments, however, the case is stronger.
How could the coalition’s ultimatum to the European Commission and European Parliament mark a decisive turning point for Europe’s leadership in financial asset tokenisation?
So what does all this mean for Europe? For now, the ECB and the European Commission are not moving quickly enough for many institutions. In response, a number of them have begun forming coalitions to push their own agendas forward. As in the payments sector, there is growing unease about relying too heavily on American companies, and banks are wary of missing out on a significant market opportunity. By launching a euro-backed stablecoin, some appear to be positioning themselves as a de facto digital euro. With little clear direction from European authorities, they see few alternatives but to act. Whether regulators will accelerate their efforts remains uncertain, with no strong signals so far.
If this coalition succeeds in influencing policy in Brussels, what scenarios can we predict for the future development of DLT-based financial markets in Europe?
Qivalis includes several major European banks, and regulators in Brussels are unlikely to ignore them for long. This makes near-term regulatory action likely, which could drive several transformations.
Interbank settlement may become instantaneous, improving liquidity but requiring stronger real-time monitoring and risk management. Businesses would benefit from faster payments, particularly in cross-currency transactions, improving cash flow and reducing delays. The tokenisation of instruments like bills of lading, combined with tokenised money, could significantly streamline trade finance.
KYC, KYB, and AML processes would also need to evolve. With instant transactions, decision-making must be real time, likely increasing reliance on automation and AI. However, these changes will not replace existing systems entirely. For consumers, instant payments already meet most needs, so clear use cases and tangible benefits will be key to wider adoption.
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