European regulator warns of risks of tokenized shares
Date: 2025-09-03 Author: Henry Casey Categories: CRYPTO PAYMENTS
The European Securities and Markets Authority (ESMA) noted that the tokenized asset market, estimated at around $600 billion, is growing rapidly, but requires strict regulation and investor protection. ESMA Executive Director Natacha Cazenave emphasized that tokenization has the potential to significantly transform financial markets, but without proper regulations, this could entail risks for market participants and financial stability.
It is noted that Europe is currently leading the tokenized bond segment. In 2024, the region accounted for more than half of the global tokenized debt market, the volume of which tripled, reaching €3 billion ($3.5 billion). Notable projects include digital bonds from the German Finance Ministry, covered bond tokens from Societe Generale and Santander, and a digital bond from the European Investment Bank on the Luxembourg Stock Exchange in 2022.
Cazenave expressed concerns about the transparency of tokenized shares. Many of them are derivatives rather than direct ownership rights, which can be misleading for investors. According to her, such synthetic instruments require clear communication and safeguards to reduce the risk of misunderstandings.
A regulatory sandbox called DLT Pilot Regime is in place to test new solutions, where companies can experiment with blockchain trading and settlement systems. ESMA proposes making this regime permanent, adapting it to different business models.
The global market is also seeing active growth in tokenization. In the US, the first SEC-registered tokenized money market fund appeared in 2021, and by 2025, the volume of tokenized funds increased by 80%, reaching $7 billion. The Token Terminal platform recorded a record volume of assets under management - $270 billion. Tech companies, including Google and CME Group, are developing solutions for institutional tokenization and real-time settlement.
However, not all initiatives are welcome. In July, Robinhood was criticized for offering tokenized shares of SpaceX and OpenAI, which, according to Elon Musk, do not represent real ownership.
ESMA continues to analyze the work of the pilot regime, including issues of trading, custody of tokenized assets and compliance with investor protection standards. Cazenave emphasized that the full integration of tokenization into the financial system is only possible in conjunction with a digital euro, since a wholesale digital euro is not yet available. The European Central Bank has already announced long-term and short-term initiatives to implement DLT for settlements in central bank money - the Appia and Pontes projects.
