The European Commission has been closely following the impact of distributed ledger technology on financial markets. To ensure that European markets benefit from legal certainty when distributed ledger technology (DLT) is used to issue assets and provide related financial services, the European Commission had proposed, and the co-legislators adopted, two important legislative acts: Regulation (EU) 2023/1114 on markets in crypto-assets (MiCA) and Regulation (EU) 2022/858 on a pilot regime for market infrastructures based on distributed ledger technology (DLTPR), both providing DLT-adapted frameworks for crypto-assets and traditional financial instruments respectively.
Beyond the area of crypto-assets governed by MiCA, DLT is experiencing increased uptake by ‘traditional’ regulated financial entities that deal with financial instruments under Directive 2014/65/EU (MiFID) and provide related services. To accompany this trend, the Commission Directorate General for Financial Stability, Financial Services and Capital Markets Union (DG FISMA) is organising an initial workshop on asset tokenisation with industry representatives. Understood broadly, asset tokenisation encompasses processes of issuing tokens on DLT that digitally represent a financial instrument, and also includes providing regulated financial services relating to tokenised instruments, as well as building the infrastructure that supports asset tokenisation activities.
The aim of this workshop is to discuss the three topics set out below, collecting feedback from market participants on their experience with asset tokenisation and identifying within each session issues that represent notable challenges (regulatory or otherwise) for nascent asset tokenisation initiatives as well as examine the role of the industry and the public sector.
The workshop will be held physically in Brussels, bringing together stakeholders selected in line with the process below. The workshop will not be streamed online.
Specific privacy statement
Registration
The European Commission welcomes expressions of interest from stakeholders to participate in the workshop.
Industry stakeholders expressing their interest would be expected to contribute in the workshop based on the projects in the area of asset tokenisation they have been involved in.
Eligible participants include both representatives of financial entities and non financial entities that provide key services in support of asset tokenisation. The Commission will decide on the final composition of the workshop sessions based on the expressions of participation interest received.
The European Commission will select the participants for the workshop taking into account in particular the following criteria
- ensuring a good balance of different categories of participants active in asset tokenisation
- experience with concrete projects related to the particular workshop topic, be it through an in-house developed project or by working closely with third parties
- ensuring a good geographical and gender balance of participants
Registration is closed.
- financial services | digital finance strategy
- Tuesday 11 June 2024, 09:00 - 17:45 (CEST)
Programme
- 11 Jun 2024, 09:30 - 11:30 (CEST)Session 1: Tokenisation of funds
Indicative timing.
Asset tokenisation has seen increased activity particularly in the fund industry. Reducing business costs, as well as increasing operational and settlement efficiency are often touted as benefits of tokenising units in collective investment undertakings. However, the technology used is still nascent and fast-changing, while the processes used to issue, manage and distribute tokenised funds are only being established across the world.
Tentative questions to be discussed
- Why tokenise? What are benefits for consumers, investors and markets?
- What challenges does the industry face when tokenising funds and underlying assets? What are the essential pre-conditions for tokenisation in the EU funds markets?
- What role should policy makers and supervisors play in mitigating the risks and enabling market participants in seizing the opportunities of asset tokenisation?
- Why tokenise? What are benefits for consumers, investors and markets?
- 13:30 - 15:30 (CEST)Session 2: Secondary markets
Indicative timing.
Most asset tokenisation initiatives to date concerned primary issuances of financial instruments, with no organised markets available to support secondary trading. The reasons most often given by market participants relate to the lack of a widely available settlement asset (cash leg) ‘on-chain’, the need for large upfront investments by market infrastructures facilitating secondary markets and the fact that successful secondary markets often require cooperation of a set of market participants – which may be reluctant to implement DLT in their operations for various reasons. While the DLT Pilot is up and running and experience will be reviewed in due course in line with the timetable set out in the regulation, the purpose of this session is to explore topics also going beyond the DLT Pilot.
Tentative questions to be discussed
- What are the essential preconditions for organising secondary markets in tokenised financial instruments?
- Would or do secondary markets in tokenised assets imply a clear separation of trading and post-trading as is the case in current markets or are more integrated models possible? What structures of secondary markets trading and settlement could emerge and how would these relate to existing secondary markets of traditional instruments?
- Does the DLT Pilot allow for the organisation of secondary markets in tokenised financial instruments? If not, what is missing?
- What are the essential preconditions for organising secondary markets in tokenised financial instruments?
- 15:45 - 17:45 (CEST)Session 3: Interoperability and standardisation
Indicative timing.
Today, asset tokens are issued using varying token standards that structure and govern essential properties of a token, such as its issuance and transfer. Tokens are also issued on different blockchain-based platforms that are not interoperable. These ‘platform islands’ can lead to fragmentation of markets and liquidity in the absence of efficient interoperability channels, while proliferation of token standards may lead to operational inefficiencies.
Tentative questions to be discussed
- What are some current token standardisation and interoperability initiatives in the area of tokenisation of financial instruments? Do you think there is a need for further initiatives on this in the EU?
- Are token standardisation and DLT interoperability interconnected, and if yes, what are the links?
- Can tokenisation of financial instruments develop across multiple and diverse DLT infrastructures or is standardisation and/or interoperability between these infrastructures essential to support an EU-wide or global tokenised financial instrument ecc-system?
- Is there a role for policy makers in encouraging standardisation and interoperability, and if yes, what role should that be?
- What are some current token standardisation and interoperability initiatives in the area of tokenisation of financial instruments? Do you think there is a need for further initiatives on this in the EU?
Practical information
- When
- Tuesday 11 June 2024, 09:00 - 17:45 (CEST)
- Languages
- English