TLDR
- The European Commission is preparing proposals to tokenize traditional financial assets, such as equities and bonds.
- The EU plans to shift its focus from MiCA 2.0 to tokenizing real-world financial instruments.
- Peter Kerstens, adviser to the European Commission, emphasized the importance of tokenizing financial assets for market modernization.
- The Savings and Investment Union will help integrate Europe’s fragmented capital markets using blockchain technology.
- The DLT Pilot Regime will be upgraded to support the broader adoption of tokenized financial instruments.
The European Commission is preparing to introduce new proposals in December. These proposals aim to bring traditional financial assets onto the blockchain. This shift signals a move away from MiCA 2.0 and towards real-world asset (RWA) tokenization.
EU to Focus on Tokenizing Financial Assets
Peter Kerstens, adviser to the European Commission, confirmed the change in focus. He revealed that the Commission is preparing proposals for the Savings and Investment Union (SIU). These proposals will address the tokenization of traditional financial instruments like equities, bonds, and derivatives.
Kerstens explained that tokenization would involve representing financial assets as digital tokens on blockchain networks. By doing so, the EU intends to modernize capital markets and integrate Europe’s fragmented financial systems. This shift aims to increase efficiency and transparency in investment channels.
Kerstens stated that the Commission’s priority is now on real-world asset tokenization. “We should focus on something much bigger, much more important,” he said. Tokenizing financial instruments will be a crucial part of the EU’s broader financial modernization plans.
MiCA’s Role in the EU’s Financial Strategy
The MiCA framework, which became effective last year, primarily regulates crypto issuers and service providers. Kerstens suggested that regulators should now look beyond improving MiCA and focus on tokenization. This shift indicates the EU’s evolving approach towards the integration of blockchain in traditional finance.
MiCA has been a key regulatory tool for the crypto sector, but its focus remains on digital assets. As the EU explores tokenization, MiCA’s role may shift toward supporting broader market applications. The Commission’s new proposals aim to build upon MiCA’s foundation but extend beyond digital asset regulation.
Upgrading the DLT Pilot Regime
To advance tokenization, the European Commission plans to upgrade the DLT Pilot Regime. Launched in March 2023, this pilot offers a controlled environment to experiment with tokenized securities. By doing so, the EU will allow regulators and institutions to test blockchain applications while maintaining necessary investor protections.
Kerstens emphasized that the insights from the DLT Pilot Regime will inform the broader adoption of tokenized financial instruments. These developments aim to establish distributed ledger technology (DLT) as a core component of capital market infrastructure.
