Tokenized securities in Europe

There is no EU tokenization licence. A tokenized security is governed by MiFID II as an instrument, by CSDR for settlement, by the DLT Pilot Regime if it trades on a ledger infrastructure, and by national law for the one thing that actually changes — whether the ledger can be the register.

How are securities tokenized in Europe?

A security is tokenized in Europe by issuing it in a form whose ownership record is a distributed ledger, under the same securities law that would apply without the ledger. In practice that means four things: an instrument that is validly created under the law of a member state, an authorised firm to issue and place it, a register whose legal standing is recognised in that jurisdiction, and a transfer mechanism that enforces the instrument’s eligibility restrictions.

There is no EU-wide "tokenization licence" and no separate securities regime for tokenized instruments. Directive 2014/65/EU (MiFID II) defines the instruments; Regulation (EU) 2023/1114 (MiCA) expressly excludes crypto-assets that qualify as financial instruments from its scope in Article 2(4); Regulation (EU) 909/2014 (CSDR) governs settlement and central registers; and Regulation (EU) 2022/858 provides a time-limited pilot regime for market infrastructures that trade and settle them on DLT.

National law then decides the question EU law leaves open: whether a ledger record can be the legal register of the security. Germany’s Electronic Securities Act created crypto-securities registers for that purpose. France recognised registered securities in a blockchain under its 2017 decree, a route the AMF describes alongside the pilot regime. Luxembourg implemented the pilot regime through its law of 15 March 2023 and amended its definition of financial instruments accordingly, as the CSSF sets out. The instrument is European; the register is national.

Read the stack from the top. Everything below classification is conditional on it, and the register layer is where two structures that look identical in a deck can differ materially in law. That is the single most useful thing to take from this page: the question is never "is tokenization allowed in Europe" — it is "which of these six layers is settled for my instrument, in my domicile, and which is not".

MiCA, MiFID II, CSDR and the DLT Pilot Regime — which applies to what?

MiFID II applies to the instrument. CSDR applies to its settlement and central registration. The DLT Pilot Regime applies to market infrastructures that want to trade or settle it on a ledger with targeted exemptions. MiCA applies to crypto-assets that are not financial instruments, and to crypto-asset services such as custody, exchange and transfer. The four do not overlap on the same object.

The boundary that causes most cost is the first two rows. ESMA published guidelines in December 2024 on the conditions and criteria for qualifying crypto-assets as financial instruments, and those guidelines are the controlling document national authorities apply. A tokenized share, bond or fund unit is a financial instrument; MiCA then applies only to ancillary crypto-asset services around it, not to the instrument.

CSDR is the least discussed and most structural. Its requirements assume a central securities depository and book-entry form, which is precisely what a ledger-native issuance is not. That is why the pilot regime exists: it grants specific exemptions from named CSDR and MiFID II articles so a DLT infrastructure can operate. The ESMA register of authorised DLT market infrastructures lists those exemptions per operator, which makes it the most concrete document in this area.

Where can tokenized securities be issued, traded and settled?

Issued: in any member state whose law supports the instrument and the register, with Germany, Luxembourg, France and Ireland the most used. Traded: on a MiFID II venue, or on one of the small number of DLT market infrastructures authorised under the pilot regime. Settled: through a CSD under CSDR, or within a DLT settlement system or DLT trading and settlement system holding specific permission.

The trading and settlement side is genuinely narrow, and the ESMA register is the authoritative list. As recorded there, CSD Prague received permission to operate a DLT settlement system on 11 October 2024, 21X AG received permission for a DLT trading and settlement system on 3 December 2024, and 360X AG received permission for a DLT MTF on 29 April 2025. 21X opened its venue fully on 8 September 2025. Three infrastructures across the whole Union is the market reality behind a great deal of enthusiastic commentary.

For an issuer, the practical consequence is that primary issuance is available now and secondary trading is available in a few places. Most tokenized European securities today are issued, held and transferred bilaterally between eligible holders rather than traded on a venue, and any liquidity claim should be tested against which of the authorised infrastructures the instrument is actually admitted to.

Settlement of the cash leg remains the constraint. The pilot regime permits settlement in commercial bank money rather than central bank money in defined cases, and e-money tokens under MiCA give a ledger-native cash option. Neither is yet the default. Where the cash leg sits off-ledger, delivery versus payment is a process rather than a property of the transaction, whatever the asset leg can do.

What are the custody rules for tokenized securities?

Safekeeping a tokenized security is a MiFID II ancillary service, not a MiCA service. That distinction decides which licence a custodian needs and it is regularly stated incorrectly. Where the instrument is a financial instrument, custody sits under MiFID II and, for funds, under the depositary obligations in AIFMD or the UCITS Directive. Where the asset is a crypto-asset that is not a financial instrument, custody is the MiCA service in Article 75.

Three obligations matter in either case: segregation of client holdings from the firm’s own, an accurate register of positions per client, and liability for loss. Applied to a ledger, segregation is a question about wallet architecture and key control rather than about account structure, and supervisors ask how the firm evidences that a holding is the client’s and not its own.

For fund structures the depositary function is unchanged and is the item that takes longest in practice. The depositary must be able to oversee a register kept in a form it may not have overseen before, and it will want the token documentation, the transfer-rule logic and the reconciliation design before it accepts the appointment. Budget for that review rather than treating it as a formality.

How does this differ from Switzerland, the UK and the US?

Switzerland has the clearest register law, the UK has the most active fund tokenization practice, the US has the deepest distribution, and the EU has the only harmonised cross-border framework. Each advantage comes with a corresponding limitation, and the right jurisdiction depends on where the investors are rather than on which regime reads best.

The EU’s distinctive asset is the passport. An instrument issued through a MiFID II firm in one member state can be placed across the EEA without re-authorisation, which no other jurisdiction on this list offers. Its distinctive weakness is that the register — the thing tokenization actually changes — is left to national law, so the same structure has different standing in different domiciles.

For a manager choosing where to build, the sequence that works is: decide where the investors are, then which regime reaches them, then which domicile gives the register the standing you need. Groups operating across regions run parallel structures deliberately — in our own case, MiFID II issuance in the EEA through a BaFin-licensed firm and US distribution through affiliate broker-dealer and ATS arrangements, because one structure cannot serve both.

What changes in 2026 and 2027?

Three changes are in motion. ESMA reported on the functioning of the DLT Pilot Regime under Article 14 of the Regulation in 2025 and was mandated to report on the regime’s results by March 2026. The Commission has since proposed a reform of the pilot regime that would widen the entities eligible to operate DLT infrastructures. And the Commission’s market integration package reopens UCITS, AIFMD, MiFID/MiFIR, CSDR and the cross-border fund distribution rules, with tokenization among the subjects in scope.

The pilot-regime reform matters most to infrastructure. As reported by practitioners, the proposal would add crypto-asset service providers authorised under MiCA — and organised trading facility operators — to the list of entities that may apply for permission to operate a DLT trading venue or DLT trading and settlement system, on the basis that excluding the firms with the most DLT experience is disproportionate. ESMA’s Article 14 report is explicit that the small number of operational infrastructures limits how much can be concluded from the pilot so far.

On the fund side, ESMA is engaging with national authorities on real-life fund tokenization cases and examining whether regulatory barriers exist in the UCITS and AIFMD regimes, as its chair set out in a speech on 12 June 2026. EFAMA has argued that many of the barriers identified in the Savings and Investments Union consultation can be addressed through DLT. Nothing there is settled law yet, and planning on it would be premature.

What will not change: MiCA will not begin to cover tokenized securities, and MiFID II will not cede the securities perimeter. Plan on two regimes with a hard boundary, a register question answered by national law, and settlement reform arriving through the pilot regime rather than around it. For the layer below this page, read how the MiFID II and MiCA classification is actually made, what the DLT Pilot Regime permits and who holds a licence, or whether a UCITS or AIF can be tokenized.