The EU has a major opportunity to boost competitiveness and growth by accelerating adoption of digital assets in financial markets. Doing so would directly advance the goals of the EU’s Savings and Investment Union (SIU), lowering costs for businesses, improving efficiency, and broadening access to finance for households and investors.
To explore this potential, Ripple and the European Fintech Association co-hosted a policy roundtable in Brussels with participants from the European Commission, regulators, and both established and emerging firms. The discussion was wide-ranging and identified a number of key areas that the EU should focus on as it further expands its oversight of the industry. These areas are outlined below.
Driving Competitiveness Through Digital Assets
The EU has been a world leader in regulating cryptoassets, with the Markets in Crypto Assets (MiCA) regulation passed over two years ago. MiCA established the EU as the first major global jurisdiction to implement comprehensive cryptoassets regulation, and gave European banks and financial institutions the confidence to lean into the technology.
To maintain its edge, Europe needs to accelerate implementation, update legacy rulebooks, and apply flexible, principle-based rules that reflect the realities of distributed ledger technology (DLT). This means enabling innovation within proportionate risk frameworks — not letting outdated processes slow progress.
Modernising the DLT Pilot Regime
The EU’s DLT Pilot regime was set up in 2023 to allow experimentation with DLT in trading and settlement. It allowed for certain exemptions from existing rules for licensed participants. While the DLT Pilot Regime was a positive start, limited uptake shows that it needs refinement.
Participants recommended three priorities for improvement:
Raise or remove activity limits once risk controls are proven, allowing meaningful scale for institutional use cases.
Broaden available exemptions from legacy rulebooks to better reflect the unique characteristics of DLT-based systems.
Enable faster approvals via a streamlined process where the European Commission can authorise new exemptions, where justified, on ESMA and NCA advice.
Make the regime permanent, providing long-term certainty for firms to progress from pilot to production and then to mainstream adoption.
Simplify authorisation requirements for smaller innovators to reduce regulatory burden and encourage experimentation.
Harmonise implementation across member states, minimising national discrepancies that create friction and slow adoption.
A Multi-Asset Future for Settlement
Different forms of money (central bank money, bank deposits, stablecoins) are complementary and have different strengths and use cases.
Central bank money is likely to play an important role in digital markets as it does today, though its role may be different in digital markets due to advances like atomic settlement which reduce settlement risk. Initiatives to make central bank money available for on-chain settlement, such as the Eurosystem’s Appia and Pontes, are welcome, and are likely to be adopted quickly once ready.
Stablecoins are being widely adopted as on-chain settlement assets and have unique advantages for some use cases such as cross-border settlement, collateral for secured funding and programmability / smart contracts. Provided they are well regulated, stablecoins have an important role to play in DLT-based financial markets. The DLT Pilot should continue to support settlement in both stablecoins and central bank money, ensuring flexibility and innovation across use cases.
Removing Barriers to DLT Adoption
Beyond regulation, several structural barriers still hinder adoption of DLT in financial markets:
Collateral eligibility: Tokenised assets should be accepted on comparable terms to traditional collateral. This includes secured funding, ECB open market operations and margin rules and would unlock participation by financial institutions and professional investors.
Proportionate prudential treatment: Capital requirements should reflect actual risks, not penalise technology.
Legal and tax clarity: Settlement finality and consistent tax treatment are essential for investor confidence.
Cross-border access: Streamlined frameworks should enable EU firms to serve international markets efficiently and allow international firms to do the same in the EU.
Interoperability: DLT platforms must connect seamlessly with traditional systems to achieve institutional scale.
At the same time regulators need to consider new risks that could be posed by tokenised financial instruments. These include the risks of tokenisation structures where holders of a token have a claim on a special purpose vehicle (SPV) rather than owning the asset itself. Such arrangements may be classed as derivatives and may pose additional risks to users.
Seizing the Moment
Europe has already built the foundations for a thriving digital-asset economy. As the participants at our policy summit agreed, the next step is to act boldly, expanding the DLT Pilot, supporting different settlement assets, and aligning prudential rules with innovation. By doing so, the EU can position itself as a global leader in tokenised finance, driving growth, efficiency, and competitiveness across its single market.
Ripple looks forward to continuing its collaboration with European policymakers and industry leaders to help make that vision a reality.
