EU Finance Ministers Back Dramatic Expansion of Tokenization Sandbox
TREE NEWS reports: The Council of the European Union has agreed the main elements of its negotiating position on the Market Integration and Supervision Package (MISP), a flagship effort to deepen and connect the bloc’s capital markets. At the center of the debate: the DLT Pilot Regime, the EU’s dedicated sandbox for tokenized securities and market infrastructures. The European Commission had proposed lifting the regime’s ceiling from roughly €6 billion to €100 billion per DLT market infrastructure. Finance ministers now want to go further — pushing the cap toward €300 billion.
European Central Bank President Christine Lagarde has pushed back, cautioning that a rapid expansion could outpace the supervisory and settlement safeguards needed to contain risk in tokenized markets.
Why the Cap Matters
The DLT Pilot Regime was designed as a controlled environment where firms could issue, trade and settle tokenized securities — bonds, funds, equities — using distributed ledger technology. Its original size limits meant that only a handful of pilot transactions could fit inside the sandbox, blunting its usefulness for large-scale issuance.
- €6bn today: Too small for meaningful institutional volumes, especially in fixed income and fund units.
- €100bn (Commission proposal): A tenfold-plus jump that would make tokenized sovereign and corporate debt viable at scale.
- €300bn (Council position): Would put the regime closer to the size of a mid-sized European exchange segment, signaling that tokenization is moving from experiment to market infrastructure.
The Institutional Signal
For banks, asset managers and market infrastructure operators, the direction of travel is unambiguous. The EU is treating DLT-based settlement as a permanent part of its capital markets union rather than a novelty. That matters for the growing cohort of tokenized money market funds, covered bonds and private credit vehicles that have been quietly accumulating assets in Europe and beyond.
The tension between finance ministers and the ECB is also instructive. Lagarde’s objection is less a rejection of tokenization than a demand for sequencing: expand the perimeter only as fast as supervision, custody and central bank money settlement can keep pace. That is a familiar pattern — innovation is welcomed, but only inside a framework where the central bank retains visibility and control over the settlement layer.
What to Watch Next
The MISP still requires negotiation between the Council, the European Parliament and the Commission. Key questions include whether the raised cap applies per infrastructure or across the regime, how tokenized central bank money interacts with commercial bank settlement tokens, and whether supervisors get new powers to intervene if volumes scale faster than expected.
If the €300 billion figure survives trilogue talks, the EU would host the world’s largest regulated sandbox for tokenized securities — a powerful magnet for issuers weighing Europe against more fragmented US and Asian regimes. The pilot regime, once a cautious experiment, is becoming the bloc’s answer to the global race for tokenized capital markets.
