EU Moves to Vet Tokenized Collateral, Including Legal Rights
Summary
- The European Securities and Markets Authority (ESMA) said it is reviewing the conditions for EU central counterparties (CCPs) to use tokenized collateral.
- ESMA said it will examine whether legally enforceable rights, customer-asset protection, and settlement finality can be secured for tokenized collateral.
- ESMA said it will evaluate the feedback it receives and determine whether changes to the existing regulatory framework and additional regulatory and supervisory measures are needed.
Forecast Trend Report by Period
The European Union is moving to assess the safety of tokenized collateral.
Cointelegraph reported on Oct. 9 that the European Securities and Markets Authority, the EU’s securities regulator, is examining the conditions under which EU central counterparties, or CCPs, can use tokenized collateral safely and effectively. It will collect industry feedback through Jan. 15, 2027.
Tokenized collateral refers to assets such as securities, or rights to those assets, that are tokenized on-chain and used as collateral. ESMA’s review covers both assets tokenized from holdings kept in traditional financial infrastructure and assets issued directly on distributed ledgers.
ESMA says even highly liquid assets could become harder to dispose of after tokenization because redemption procedures or transfer restrictions may delay sales. It also plans to examine whether a token transfer results in the actual transfer of ownership of the underlying asset or legally enforceable rights to it.
The review will also cover whether links between blockchain networks and traditional financial infrastructure can ensure customer-asset protection, segregation of holdings and settlement finality. ESMA is also examining how payment assets such as stablecoins, central bank digital currencies, or CBDCs, and tokenized deposits connect with one another.
Verena Ross, chair of ESMA, said tokenized markets need legal certainty, interoperable infrastructure and appropriate oversight to expand safely.
ESMA plans to assess the feedback in the first quarter of 2027 and then decide whether changes to the existing regulatory framework or additional regulatory and supervisory measures are needed.
