Catenaa, Wednesday, March 25, 2026-Circle called on European policymakers to accelerate reforms to digital asset rules, warning that delays in updating frameworks for tokenized assets and stablecoins could shift market leadership to the United States and slow institutional adoption across the bloc.
In a March 20 response to the European Commission’s proposed Market Integration Package, the U.S.-based stablecoin issuer backed planned expansions to the Distributed Ledger Technology Pilot Regime but said existing limits on volume and settlement remain barriers to growth. The company urged regulators to replace fixed caps with flexible thresholds tied to market conditions and to establish a clearer transition from pilot programs to permanent frameworks.
Context
The EU’s DLT Pilot Regime, launched in March 2023, allows supervised experimentation with blockchain-based trading and settlement of financial instruments. Uptake has been limited, with only a handful of approvals, largely due to restrictions such as a €6 billion cap on financial instruments and a narrow set of eligible assets including shares, bonds and certain funds.
The Commission’s December 2025 proposal seeks to expand the regime significantly. Planned changes include raising the cap to €100 billion, allowing all financial instruments, and introducing a simplified framework for smaller participants. The proposal also permits crypto-asset service providers to participate alongside traditional financial institutions and removes time limits on approvals, signaling a move toward permanence.
Circle said these changes are a step forward but argued that rigid limits and unclear pathways to full-scale adoption continue to discourage institutional participation.
Implications
A central concern raised by Circle is the role of stablecoins in securities settlement. The company said current rules recognize e-money tokens for settlement but restrict access for issuers that are not classified as “significant,” potentially sidelining euro-denominated stablecoins.
Circle called for broader access to settlement infrastructure, allowing crypto firms to offer accounts rather than limiting participation to banks and central securities depositories. The company said current structures add friction and reduce efficiency in blockchain-based markets.
The firm also highlighted gaps in supervision and collateral rules, suggesting that oversight by the European Securities and Markets Authority should focus on large cross-border firms, while smaller entities remain under national regulators. Clearer rules on stablecoin collateral, it said, would align the EU with evolving frameworks in the U.S. and UK.
The stakes are rising as tokenized assets gain traction globally. Industry estimates show tens of billions of dollars in tokenized funds, bonds and real-world assets already onchain. Europe’s proposed €100 billion pilot cap exceeds current U.S. crypto-linked investment products, but analysts warn that without scalability and regulatory clarity, the region risks losing momentum to faster-moving jurisdictions in North America and Asia.
Expert views
Market participants increasingly view regulatory speed as a decisive factor in adoption. Asset managers and exchanges have called for fewer restrictions on post-trade processes and greater interoperability between blockchain-based and traditional systems.
Industry groups have urged policymakers to simplify rules and accelerate timelines, warning that fragmented pilot programs could split liquidity and discourage participation. Financial institutions have also pointed to the need for clearer treatment of collateral and settlement mechanisms to support large-scale deployment.
At the same time, regulators remain cautious following past market disruptions, including major stablecoin failures. Policymakers continue to balance innovation with financial stability, which has slowed the pace of reform.
Background
The EU has been a global leader in crypto regulation, introducing comprehensive rules under the Markets in Crypto-Assets framework, which took effect in 2024 and established licensing requirements for digital asset service providers. The DLT Pilot Regime followed as a controlled environment to test blockchain applications in capital markets.
Despite this early lead, competition has intensified. The U.S. is advancing legislation to clarify digital asset oversight, while jurisdictions such as Singapore, Hong Kong and the United Arab Emirates are expanding frameworks for stablecoins and tokenized finance.
Circle’s push reflects broader industry concerns that Europe’s cautious approach could limit its role in shaping the next phase of financial market infrastructure. The company said tokenization has the potential to improve efficiency and reduce costs across capital markets but requires regulatory frameworks that can scale with demand.
The Market Integration Package is expected to move through the European Parliament and Council, with implementation timelines extending into 2027. Industry participants say faster action may be needed to keep pace with global developments.
