Europe’s tokenisation push hits post-trade bottleneck

By Vriti Gothi

European tokenisation firms are intensifying calls for accelerated regulatory and infrastructure reform as compressed settlement cycles and increasing global competition reshape capital markets. Industry participants argue that without structural adjustments to post-trade frameworks, Europe risks slowing the transition of tokenised assets from pilot environments to full-scale production.

The debate comes at a time when major markets are shortening settlement cycles to reduce counterparty risk and improve capital efficiency. With T+1 settlement becoming the norm in several jurisdictions and discussions around T+0 gaining traction, tokenised financial instruments, which promise near-instant settlement are placing renewed focus on operational resilience, legal certainty, and interoperability.

Against this backdrop, market leaders are warning that technological innovation alone will not be sufficient to scale tokenised markets. The surrounding legal and operational infrastructure must evolve in parallel.

Commenting on the issue, Richard Baker, Founder and CEO of Tokenovate, said tokenised markets depend on coordinated reform across settlement and risk management systems.

“European tokenisation firms are right to push for faster reform, because tokenised markets only work when the infrastructure around them evolves too,” Baker said. “Settlement, legal finality, risk and liquidity management are where tokenised markets either succeed or stall, particularly as timelines compress and markets move toward T+1 and T+0 settlement.”

Tokenisation the process of representing financial assets on distributed ledger technology (DLT) has gained traction across asset classes, including bonds, funds, and derivatives. While early pilots have demonstrated operational efficiencies, scaling these systems to handle production-level volumes requires harmonised standards and legally robust settlement mechanisms.

Baker pointed to the United States as an example of a jurisdiction moving beyond experimentation. “As the US moves from pilots into production with clearer regulatory signals, the risk for Europe is that market infrastructure remains constrained by frameworks designed for experimentation rather than scale,” he said.

The distinction between pilot regimes and production-grade systems is becoming increasingly significant. Regulatory sandboxes and distributed ledger pilot programmes have allowed European firms to test tokenised issuance and settlement models under controlled conditions. However, moving into live environments demands clarity around legal finality, cross-border recognition of digital assets, and integrated liquidity management.

According to Baker, reform should focus on automating the post-trade lifecycle end to end from trade execution through clearing, settlement, and reporting to eliminate manual reconciliation and fragmented workflows that characterise legacy systems.

“To stay competitive, reform needs to focus on automating the post-trade lifecycle end to end, supported by shared standards such as the Common Domain Model, which provides the semantic layer needed to make tokenised settlement interoperable, legally sound and scalable,” he said.

The reference to the Common Domain Model reflects growing industry emphasis on standardised data and process definitions. Without shared standards, tokenised ecosystems risk creating new operational silos rather than resolving long-standing inefficiencies in market infrastructure.

Industry analysts note that as settlement cycles shorten, the margin for operational error narrows. Real-time or near-real-time settlement requires synchronised collateral management, automated risk controls, and robust liquidity provisioning frameworks. Any fragmentation in data standards or legal interpretation could introduce systemic risk.

For Europe’s financial markets, the question is increasingly less about whether tokenisation will become mainstream and more about whether regulatory and operational frameworks can support it at scale. As jurisdictions compete to attract digital asset issuance and trading activity, infrastructure readiness is emerging as a decisive factor.

Baker’s comments underscore a broader inflection point for European capital markets: the transition from experimentation to production in tokenised finance will depend not only on technological capability but also on coordinated reform of the post-trade ecosystem.