Three years, six licenses, almost no trading activity. The DLT Pilot Regime was supposed to be Europe’s sandbox for tokenized capital markets. So far, it’s a sandbox without anyone playing in it.

On Tuesday, Nasdaq, Boerse Stuttgart, Danske Bank, Union Investment, and 35 other organizations co-signed a joint letter to Brussels demanding what they call a "Quick-Fix": pull the most urgent DLT Pilot Regime reforms out of the broader Market Integration and Supervision Package (MISP) and pass them as standalone legislation before the whole thing gets stuck in multi-year negotiations.

What they want:

  • Open the regime to all financial instruments, not just plain vanilla bonds and select fund units.

  • Raise volume caps from €6 billion to at least €100 billion.

  • Delete per-instrument limits.

  • Make licenses permanent instead of temporary.

  • Apply immediately upon entering into force.

For some signatories, particularly the newer DLT Trading and Settlement Systems, this is a business model necessity. They need regulatory room to out-innovate the incumbent market infrastructures.

Yet, the 39 logos aren’t only driven by self-interest. Behind the scenes, an increasing number of European institutions are backing the cause as a matter of sovereignty. The U.S. is pushing aggressively for onchain capital markets, and Europe’s regulatory lead is fading fast.

If the continent doesn’t build competitive infrastructure, liquidity won’t wait.

Still, regulation is only half of the equation. Even if Brussels granted every demand tomorrow, you’d still face the hardest problem in market infrastructure: the cold start. No issuers without investors. No investors without liquid secondary markets. No secondary markets without critical mass. Tokenized bonds still trade at a yield premium over their traditional equivalents because the ecosystem simply isn’t there yet.

Dear Brussels, the market could use a Quick-Fix for that, too.

In today’s Briefing:

  • Broadridge invests in the collateral mobility solution HQLAx

  • KfW moves its tokenization program from pilot to stress-test

HIGH SIGNAL NEWS

  • Broadridge and Digital Asset invest in HQLAx. The investment is a minority stake as part of its Series C-1 round, following the Series C in April 2024 led by HSBC. The collateral mobility solution also plans to migrate its technology from R3 Corda to the Canton Network, developed by Digital Asset. 💰

  • OCBC Bank launches a tokenized physical gold fund. Via its asset management arm Lion Global Investors, Singapore’s second-largest bank partners with the regulated tokenization firm DigiFT to launch the GOLDX token on Solana and Ethereum. DigiFT is also the largest distributor of uMINT, the tokenized money market fund issued by UBS. 🇸🇬

  • Qivalis selects Fireblocks to power its euro stablecoin. Fireblocks will provide issuance, distribution, and lifecycle management. The consortium, composed of around a dozen banks including BNP Paribas, UniCredit, and BBVA, plans to launch the token in H2 2026. 🇪🇺

  • Charles Schwab partners with Paxos for its crypto offering. The crypto-native firm, already well known for its white-label stablecoin issuance model, will provide sub-custody and trade execution services. The U.S. wealth management giant, which manages nearly $11 trillion in client assets, plans to launch the offering in the first half of 2026. 🇺🇸

TOP STORY

KfW Moves Its Tokenization Program from Pilot to Stress-Test

Next chapter: KfW is entering the next phase of its tokenization journey. A few days ago, Germany’s state-owned development bank announced a third DLT-based bond, scheduled for June 2026. Different from its predecessors, the bond is purposefully designed to stress-test critical parts of the tokenization infrastructure: the registrar and the underlying blockchain will both be swapped mid-lifecycle. On the cash leg, two Eurosystem settlement rails will be tested on a single instrument for the first time.

Why it matters: KfW issues €75-90 billion of bonds annually, placing it among Europe’s largest SSA borrowers behind sovereign issuers. The June transaction will be its third under Germany’s digital securities regime eWpG, after a €100 million issuance in July 2024 and a €50 million follow-on in August. According to KfW, the upcoming issuance is about stress-testing the infrastructure under real market conditions.

  • “The last phase was about proving that DLT works in isolated transactions. As we move into scaling, the focus shifts to resilience, which is why testing scenarios like a registrar switch is critical to understand how the system performs beyond fair weather conditions,” said Tim Meier, Senior Manager Capital Market Innovation at KfW, to Blockstories.

The registrar question: Resilience starts with the entity holding the register. Under the eWpG, crypto securities registrars are the licensed entities that track ownership of a tokenized bond: the role CSDs play for traditional securities, performed on a DLT register rather than a central database. Seven are licensed in Germany today, and no live tokenized bond has moved between two of them.

  • An operation without precedent: Swapping Cashlink for DekaBank means transferring the legal truth of who owns what from one entity to another, an operation with no precedent under the framework.

The chain question: The same question applies one layer down. Polygon is a public proof-of-stake network; Regulated Layer One (RL1) is a permissioned European network co-owned by financial institutions including KfW, DekaBank, DZ Bank, ABN AMRO, and NatWest. The two offer no native interoperability. The working approach is a mint-and-burn sequence: tokens are retired on Polygon and reissued on RL1 against a synchronized registry snapshot, which KfW describes openly as a workaround rather than a target architecture.

  • “In the upcoming registrar switch, we won’t be able to transfer tokens directly between infrastructures, so we will rely on a mint-and-burn approach. That is not the end state, but by exposing these limitations in a real transaction, we hope to drive the development of shared standards across the ecosystem,” said Bert Staufenbiel, Senior Manager Digital Transformation at KfW.

From digitizing to digitalizing: Beyond stress-testing the system, the upcoming issuance will also test new lifecycle mechanics on the cash leg. Bundesbank’s Trigger Solution will handle issuance, while Pontes, the Eurosystem’s new DLT settlement platform, scheduled to go live in Q3 2026, will handle coupon payments and redemption. For KfW, this is yet another signal of tokenization entering a new phase of maturity.

  • “In general, you have to distinguish between digitization and digitalization. Over the past years, the industry largely digitized the existing process, but that’s not where the real potential lies. The next step is digitalization, redesigning the process itself, for example by embedding logic directly into money or assets through programmability,” said Staufenbiel.

The new driver: In our conversation, KfW made clear that the motivation behind this acceleration has also shifted. What started as a technical efficiency exercise now also carries a geopolitical dimension.

  • “We’re seeing significant momentum in the U.S. and Asia. As a result, what started as a question of efficiency is now equally driven by European sovereignty. We need to build our own DLT-based capital markets infrastructure,” added Meier.

What comes after the bond: KfW has committed to publishing its lessons learned across the June issuance, as it has done with earlier transactions, on the theory that open documentation will accelerate ecosystem development.

  • “What’s holding back scale is a set of developments that require both time and European-wide coordination. You need DLT-capable central bank money, a harmonized regulatory framework, interoperable infrastructure, and a sufficiently deep ecosystem, and all of these have to evolve in parallel,” concluded Staufenbiel.

Raphael Neuberger is Chief Operating Officer at Cashlink, a BaFin-licensed crypto securities registrar that also offers custody and issuance services for financial institutions.

What still needs to happen for tokenized securities to move beyond isolated pilots and reach institutional scale?

On the technology side, the fundamentals are strong. A decade of building on blockchain has proven that issuance and custody infrastructure works at scale. Money market funds alone have demonstrated this with high volumes for over two years. The feasibility question is settled.

Where the market needs more engagement is institutional trading and settlement. DLT-based multilateral trading facilities still process limited volumes. Stablecoins are not a viable option for most institutional participants, and the Eurosystem's Pontes infrastructure will only go live later this year. Until both the asset and the cash leg exist onchain, the full efficiency case cannot be realized.

The deeper bottleneck is regulatory fragmentation and market integration. Germany's eWpG has shown what becomes possible when a jurisdiction provides a clear legal framework for digital securities, but issuers and registrars still need a separate license in each country. Without a harmonized European regime, scaling across borders remains impractical.

Khai Uy Pham is an Advisor and Leader in Cross-Border Digital Currency and Payments Initiatives at Banque de France, one of the most active central banks in tokenization-related experimentation in Europe.

Notably, KfW's three blockchain bond issuances bypassed traditional CSDs. How will the role of CSDs need to evolve as DLT-based infrastructure scales?

The core function of a CSD has traditionally been to serve as the authoritative record of ownership. When a distributed ledger performs that function natively, maintaining a parallel registry raises legitimate questions: infrastructures end up reading from the chain only to reconcile it against their own books. In the long run, record-keeping alone may no longer be the central value proposition, since the ledger provides it at near-zero marginal cost.

This does not mean CSDs will disappear; they should retain a significant role in a DLT-based market structure. The market will still need trusted, regulated institutions to provide digital custody at institutional grade: safeguarding cryptographic keys, managing wallets, and authorising transaction signing. Someone must remain accountable when things go wrong onchain, and regulators will not leave that role unfilled. Settlement finality, asset servicing, and investor protection cannot be delegated to code alone.

Several CSDs are already implementing DLT-based models and infrastructures, which confirms that transformation is underway. The real question is not whether CSDs will have to evolve, but whether they can do so quickly enough, while ensuring interoperability with traditional infrastructures during the hybrid transition, before crypto-native entrants establish themselves as the default institutional layer.

  1. Tokenised Assets Distribution (Keyrock & Securitize) — The central thesis of this report is that tokenisation is no longer an issuance problem but a distribution one: assets already exist onchain, yet remain siloed, illiquid, and underutilised. The bottleneck lies in the missing layers, secondary liquidity, collateral integration, and seamless fiat and stablecoin rails.

  2. USD Stablecoin Market Structure (Range) — Beneath the surface, the stablecoin market is less competitive than it looks. This report shows that a handful of USD issuers capture most of the liquidity and usage, reinforcing a winner-takes-most dynamic, while concentrating risk in just a few critical players.

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Disclaimer: The information provided in the Institutional Briefing by Blockstories does not constitute investment advice. Accordingly, we assume no liability for any investment decisions made based on the content presented herein.

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