On Friday the European Fund and Asset Management Association (EFAMA) published a report entitled “Tokenisation, a buyside practitioner’s guide”. For asset managers it says “the strategic risks of inaction are significant”, arguing that the operational efficiencies from DLT will result in early adopters being more profitable. It reviews the legal landscape in a handful of EU jurisdictions, urging further regulatory reform. The report gives the impression of the EU currently being ahead of the game, with the risk of being overtaken by the US and Asia.
That’s emphasized by a quote from European Commissioner adviser Peter Kerstens, “In the race to establish dominance in DLT, we don’t want Europe to become a flyover zone between the US and Middle East and Asia.”
The fragmented regulated regime could contribute. To date the EU has enacted two pieces of digital asset related regulation – MiCAR for crypto-assets including stablecoins and the DLT Pilot Regime for securities. The short term nature of the Pilot Regime and the low activity limits have dissuaded major institutions from participating. A senior Clearstream executive likened it to adapting an aircraft carrier for a few Cessna landings. Only two institutions have received approval so far. This limited uptake reflects broader concerns about the regime’s structure. EFAMA recommends raising the thresholds to encourage participation and greater liquidity in secondary markets.
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