RWA tokenization in Europe

A real-world asset (RWA) is a bond, a fund unit, a loan, a share or a building that exists off a blockchain. Tokenizing it means recording the claim on that asset as a token on a ledger. In the EU the token keeps the legal nature of what it represents: MiCA explicitly excludes financial instruments, so a tokenized bond stays a security under MiFID II and the central securities depositories regulation. The answers What are real world assets? and What is tokenization of assets? explain the basics.

The difficulty is that the rules on how a security may exist in electronic form are still national. Germany has its Electronic Securities Act (eWpG), Luxembourg has its blockchain laws, and other member states have their own. In its answer to the Commission's questionnaire on tokenization, Deutsche Börse Group names these diverging laws as the barrier between EU countries and proposes an EU-wide "28th regime" for dematerialized securities.

The DLT Pilot Regime, Regulation (EU) 2022/858, lets a market operator run trading and settlement of tokenized securities on a ledger with temporary exemptions from parts of the securities rulebook. Its use has stayed small. ESMA's Executive Director Natasha Cazenave said in a keynote that most tokenized instruments are placed privately and held to maturity, so they stay small and illiquid, and that the platforms connect poorly with each other.

The Commission's market integration and supervision package answers that. According to an analysis by DLA Piper, it proposes to open the regime to all financial assets, to raise the activity threshold from 6 billion to 100 billion euros, to ease the requirements for smaller players and to drop the time limits on authorizations. The same package would move the supervision of significant trading venues, central counterparties and central securities depositories to ESMA. For an RWA project in Europe this is the change to watch: a venue that was a pilot could become a permanent market.

Frankfurt has several licensed pieces. 21X and 360X hold DLT Pilot Regime licenses, and Clearstream's D7 DLT issues tokenized commercial paper under the central securities depositories regulation; the European Investment Bank issued 77.5 million euros of it. The page on tokenization in Frankfurt follows one issue step by step. In Stuttgart, Boerse Stuttgart Group builds Seturion, a settlement platform for tokenized securities meant for all of Europe, which has applied for a DLT Pilot Regime license, with Societe Generale's SG-FORGE as partner (Ledger Insights).

In Luxembourg, Franklin Templeton has brought its tokenized money market fund model into a Luxembourg UCITS structure for European investors, covered on tokenized money market funds. Switzerland is outside the EU and has its own rules; SeturionX, formerly BX Digital, holds the first FINMA license for a DLT trading facility, and the page on Crypto Valley describes the Swiss banks in the field. Real estate trails: one of the largest German examples is the Fundament Group's 250 million euro blockchain bond backed by properties in five German cities, described on tokenized real estate.

Money on the ledger comes first. A tokenized asset settles fastest against a token of money, and Europe offers three: central bank money through the Eurosystem's Pontes, which is live for wholesale DLT transactions, tokenized deposits of commercial banks, and euro stablecoins under MiCA such as SG-FORGE's EUR CoinVertible or AllUnity's EURAU. The page on stablecoins in Europe compares the issuers.

Distribution comes second. Most European savers buy through banks and advisers, so a tokenized product has to fit their custody and reporting systems; tokenized equities such as the xStocks on 360X show one route. Supervision is the third question: under the Commission's proposal, ESMA would also take over the direct supervision of most crypto-asset service providers, leaving regulated institutions with national supervisors unless crypto services make up more than half of their turnover (DLA Piper).

Finance Loop connects the people who build tokenized markets in Germany, Austria and Switzerland and links them with the other European hubs. It connects the finance, IT and AI communities, with events in Frankfurt, Munich, Berlin and Hamburg.

At the Point Zero Forum in Zurich, 21X and Web3 Network hosted the side event Tokenization & On-Chain Capital Markets with Franklin Templeton, DFNS, AMINA and Chainlink, and Finance Loop was a partner of the Point Zero Forum. Finance Loop has also partnered with Vienna Blockchain Week, whose program covers tokenization and onchain finance, the London Blockchain Finance Summit on tokenized money, and the European Blockchain Convention in Barcelona as media partner. The Multichain Asset Managers Association, which works on onchain asset management, is an event and network partner.

In Frankfurt, CoreLedger, Finemetal and S-PRO explained at a pre-event of the Crypto Assets Conference how to digitize gold and real estate. Finance Loop has a strategic cooperation with 21X, the Frankfurt exchange for digital securities. Gubbi, a Finance Loop Premium Partner, runs the GDX Primary Market, and Fondskonzept AG and DGFRP have connected to it so that financial advisors in Germany can offer tokenized real-world assets.

An issuer creates a security, such as a bond or a fund unit, and records it as a token on a distributed ledger instead of in a paper certificate or a central account. The token moves when ownership moves, and settlement can happen in minutes against a token of money. The legal claim stays the same as for the conventional security.

The DLT Pilot Regime, Regulation (EU) 2022/858, is the EU framework that lets licensed operators run trading and settlement of tokenized securities on a distributed ledger, with some exemptions from standard securities rules. National supervisors such as BaFin grant the licenses and ESMA reports on the results. The Commission has proposed to widen it.

Yes, usually as a security that pays out rent or sale proceeds, most often a bond. The investor holds a claim against the issuer, not an entry in the land register. In Germany, BaFin approved the prospectus for the Fundament Group's blockchain bond backed by real estate.

The Crypto Assets Conference in Frankfurt, the Frankfurt Forum on Digital Assets & Applications, Point Zero Forum in Zurich with its tokenization side events, Vienna Blockchain Week and the European Blockchain Convention in Barcelona all cover tokenized real-world assets. In Germany, Capital & Code in Frankfurt covers tokenized funds, and CONF3RENCE in Dortmund has tokenization and real-world assets among its four topic areas. The German-language Forum für Digitale Vermögenswerte in Frankfurt covers tokenized securities. Dates are in the events calendar.