FESE position paper on tokenisation: Responsible adoption as a strategic opportunity

Tokenisation is reshaping financial markets by enabling digital asset representation on programmable ledgers, offering the same rights as traditional instruments while enhancing efficiency, transparency, and security. As the EU continues to shape its digital finance strategy, tokenisation could be a powerful enabler of the innovation goals highlighted in the Draghi Report. To fully realise this potential, the EU must design its regulatory framework in a way that prevents liquidity fragmentation and ensures a level playing field between regulated and unregulated entities. This position paper outlines FESE's views on the opportunities, risks, and regulatory considerations for tokenisation in the EU context.

Responsible scaling of tokenisation:

FESE believes that regulated markets (RMs), multilateral trading facilities (MTFs) and other lit trading venues are central to scaling tokenisation in a safe and transparent manner, ensuring investor protection, transparency, and rights equivalent to traditional securities. To build trust, tokenised securities should be issued by regulated entities, including new entrants subject to the same regulatory requirements, ensuring compliance with KYC/AML rules, cybersecurity standards, and operational resilience.

Appropriate classification of crypto-assets:

The EU classification of crypto assets should continue building on the achievements of the MiCA Regulation and provide further classification of the various types of crypto-assets to ensure legal certainty and uniform application of rules across national jurisdictions. A clear delineation between "financial instruments" issued in tokenised form and the crypto-assets that do not provide the same rights as traditional instruments must remain the central guiding principle of the classification.

Adapted EU regulatory frameworks:

Tokenised securities need to be effectively embedded within traditional regulatory frameworks for the EU to fully leverage the benefits of tokenisation. Without proper adaptation, business could shift from lit regulated markets to the OTC space, undermining investor protection and transparency. The DLT Pilot Regime (DLTPR) is an important first step in testing these adaptations, and we support the Commission's efforts to promote innovation and increase the attractiveness and business viability of the regime.