- EU Commission focuses on blockchain tokenization for financial market integration.
- Tokenizing real-world assets could modernize Europe’s fragmented capital markets.
- Traditional finance is embracing blockchain technology for improved asset management.
According to Peter Kerstens, an adviser at the European Commission, the focus is shifting toward tokenizing financial instruments, including real-world assets, to modernize Europe’s financial markets. During an interview at the FintechOn Summit in Taipei, Kerstens revealed that the European Commission is working on proposals related to the Savings and Investment Union (SIU).
Set to be presented in December, the SIU aims to create a more integrated financial market across the EU, utilizing distributed ledger technology (DLT) to streamline cross-border investments.
Kerstens highlighted that the tokenization of real-world assets, such as equities, debt, and derivatives, will play a crucial role in this initiative.
This would not only enhance market efficiency but also improve access to investments across the EU’s member states, overcoming the fragmentation currently present in the region’s capital markets. The European Commission hopes that by leveraging blockchain technology, it can simplify and unify Europe’s financial infrastructure.
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DLT Pilot Regime to Support Tokenization
The Commission’s push for tokenization is supported by the DLT Pilot Regime, which took effect in March 2023. This framework allows for the legal trading and settlement of crypto-assets that qualify as financial instruments.
Although initial enthusiasm from traditional financial institutions was minimal, Kerstens noted a significant shift in the last five years. Today, many banks and securities firms are more open to dealing with assets on public blockchains, signaling a growing acceptance of blockchain technology within the financial sector.
As part of its ongoing efforts, the Commission plans to update the DLT Pilot Regime to better support the tokenization of financial instruments. This shift could lead to more efficient and transparent capital markets across the EU, with blockchain providing the necessary infrastructure for the transformation.
Traditional Finance Opens Up to Blockchain
The traditional financial sector’s attitude toward blockchain has undergone a notable transformation. While there was considerable resistance just a few years ago, more financial institutions are now exploring the use of public blockchains for asset management.
This change reflects the increasing relevance of blockchain in reshaping the financial landscape, and it complements the European Commission’s broader goal of modernizing capital markets.
The move toward tokenization is expected to drive significant efficiency gains within the EU’s financial system. By focusing on this aspect, the Commission aims to facilitate smoother and more integrated capital markets, encouraging cross-border investments that could enhance economic growth across the EU.
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