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The Dubrovnik Call
At a capital-markets conference in Dubrovnik on September 1, ESMA Executive Director Natasha Cazenave called on Europe to accelerate regulatory reforms to keep pace with global developments in tokenization. In her speech, she warned that without updated frameworks, retail investors face growing risks from tokenized stock products that lack shareholder rights, and a loss of competitiveness for the EU compared to other jurisdictions.
“The shift to DLT enables 24/7 trading, efficiency, and transparency, but also has far-reaching consequences for ownership, investor rights, settlement finality, and custody. This raises the question of whether existing EU frameworks are fit for purpose or require targeted adaptations,” she said.
Why it matters
Cazenave’s remarks carry weight. As the EU’s top securities regulator, ESMA defines supervisory standards and coordinates national authorities across 27 member states, with investor protection as its ultimate objective. Her call also comes at a time when other jurisdictions, particularly the US and UK, are moving quickly to establish frameworks designed to support tokenization, increasing pressure on the EU to act.
A restrictive Pilot Regime
Europe does already have an experimental framework in place through the Pilot Regime, launched in March 2023 to test the use of blockchain in trading financial instruments. However, its restrictive design has limited participation. Most notably, securities with an issuance size above €500 million are excluded, effectively shutting out large-cap companies.
“As a result, almost all tokenization is happening outside the very regime that was meant to enable it in the first place. The clearest examples are the offerings launched by Robinhood and the bond issuances by major banks in recent years,” a European official told Blockstories.
Amendments expected by year-end
To address these shortcomings, ESMA recommended several changes in a June report, calling for the Pilot Regime to evolve into a genuine sandbox. According to the same official,
“Today, it is the European Commission that holds the pen. The necessary amendments are expected before the end of the year.”
The missing wholesale CBDC
Yet the Pilot Regime is only part of the challenge. While the framework allows settlement in stablecoins, a solution Cazenave described as “pragmatic”, the market continues to wait for a wholesale CBDC, widely viewed as the missing piece needed for tokenization to scale across financial markets.
Beyond the sandbox
Even with a more flexible Pilot Regime and progress on settlement solutions, broader regulatory changes will still be required. Several officials told Blockstories that reopening legislation such as MiFID II and CSDR will be unavoidable to redefine core concepts like settlement finality and custody in a blockchain-based market infrastructure. As one of them noted, “This is a much longer process, as any amendment would require returning to the European Parliament.”
L'avis de Blockstories
ESMA’s remarks highlight the key obstacles preventing large-scale tokenization.
By shifting to DLT-based models, tokenization removes brokers and custodians that have traditionally ensured transparency and investor protection. As a result, many tokenised products are offered directly to retail investors via self-custody wallets or reverse solicitation, bypassing licensed brokers entirely. This creates a regulatory gap: while the technology enables direct access, the absence of intermediaries could leave no one responsible for safeguarding clients or verifying marketing materials.
Another challenge is the lack of a mature ecosystem and proven case studies for large issuers. Traditional markets are tried and tested, whereas digital issuance still carries operational uncertainty. Although several native digital bonds have been launched, they were issued by sophisticated players and lack active secondary markets, leaving most tokenised securities as isolated pilots rather than scalable solutions.
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