European Union enlists private sector to develop tokenized securities standards
Industry participants have until Nov. 27 to submit applications for a working group tasked with creating preliminary standards for tokenized securities custody and settlement by the beginning of 2028.
Three major European regulatory bodies—the European Central Bank (ECB), European Commission and European Securities and Markets Authority—have launched a call for nominations to form an industry-driven working group responsible for creating unified standards governing the custody and settlement of tokenized securities.
Organizations qualified to submit applications encompass EU-based industry associations, international financial institutions, private sector companies and financial technology enterprises. These entities have until Nov. 27 to submit their applications to join the European Tokenisation Standards Group (ETSG), with operations scheduled to commence in January 2027, as outlined in a statement released on Monday. The trio of EU regulatory bodies will take part in an observatory capacity.
The working group's mandate includes establishing technical specifications and market standards designed to enable organizations to custody and settle tokenized securities across various distributed ledger technology (DLT) platforms while ensuring interoperability between those platforms and traditional financial infrastructure. According to its terms of reference, the group has set a target of delivering a preliminary package of standards by early 2028. These standards will bolster Appia, the Eurosystem's strategic project focused on creating a comprehensive framework for Europe's tokenized financial markets.
The regulatory institutions cautioned that market fragmentation has the potential to diminish the advantages of tokenization and indicated that the group may put forward recommendations for EU regulatory authorities on methods to incentivize companies to implement its standards.
In September, the Eurosystem introduced Pontes, a settlement infrastructure that enables financial institutions to settle wholesale transactions involving tokenized assets using central bank money.