EFAMA Warns Europe Is Obstructing Itself in the Global Tokenization Race, Calls for Extensive Legal Reforms to Avoid Being Left Behind by the US and Asia.
The European Fund and Asset Management Association (EFAMA) has just sent an urgent message to policymakers, emphasizing that the European Union (EU) needs extensive legal reforms if it does not want to be overtaken by the US and Asia in the tokenization of assets.
According to the in-depth report published by EFAMA last Friday, "the strategic risk of inaction is significant." EFAMA argues that pioneering companies applying Distributed Ledger Technology (DLT) will gain a clear advantage in both operational efficiency and profitability.
Although the EU is considered a global leader in building a legal framework for digital assets, EFAMA warns that Europe is at risk of losing its strategic position to the US and Asia. Peter Kerstens, a senior advisor to the European Commission, made a sharp observation: "In the race to lead in DLT, we cannot let Europe become a 'flyover zone' between the US, Middle East, and Asia."
Currently, the EU's digital asset legal framework is based on two main pillars: the Markets in Crypto-Assets Regulation (MiCAR) and the DLT Pilot Regime. However, the pilot regime, which was expected to be a stepping stone for development, is becoming a bottleneck. With low operational scale limits and a short-term timeframe, this mechanism is not attractive enough for large financial institutions.
A senior Clearstream leader compared this mechanism to "modifying an aircraft carrier just to serve a few small planes (Cessna)." To date, only two organizations have been licensed to participate, indicating very low interest.
EFAMA believes that fragmentation in national regulations is reducing the potential effectiveness of DLT technology. The association calls for broader and faster unification, not limited to the experimental framework.
Specifically, the process of adjusting key regulations such as CSDR (Central Securities Depository Regulation), MiFID, and AIFMD needs to be accelerated, making them comprehensively compatible with DLT technology, rather than just providing short-term exceptions. Unifying requirements for custody and operation of tokenized asset funds is extremely necessary to build a truly effective single market.
EFAMA's message comes at a time when the European Commission (EC) is reviewing and reassessing the entire current legal framework. These recommendations not only serve as a warning but also provide a specific action roadmap, helping the EU reposition itself in this technological revolution and avoid letting other global financial centers seize the opportunity.
