EU Tokenization Regulations: MiCA, DLT Pilot Regime Complete Guide
The European Union has created the world's most comprehensive regulatory framework for digital assets. MiCA (Markets in Crypto-Assets) and the DLT Pilot Regime provide clear rules for tokenization across 27 member states. 2025 marked a turning point—from regulatory uncertainty to operational frameworks with active licensing and enforcement.
EU Regulatory Landscape Overview
The EU approach distinguishes between:
- Crypto-Assets (MiCA): Utility tokens, stablecoins, non-security tokens
- Security Tokens (MiFID II + DLT Pilot): Tokenized securities, investment instruments
- E-Money Tokens (MiCA): Euro-pegged stablecoins
For investment fund tokenization, you're primarily dealing with security tokens under existing securities law, enhanced by the DLT Pilot Regime.
MiCA: Markets in Crypto-Assets Regulation
Timeline:
- June 30, 2024 — Stablecoin provisions (ARTs and EMTs)
- December 30, 2024 — Full implementation (CASPs, other crypto-assets)
- December 23, 2025 — iXBRL whitepaper format requirements
Scope: All EU member states (directly applicable regulation)
Current Status (December 2025)
MiCA is now fully operational. Over 40 CASP licenses have been issued across EU member states, with the Netherlands and Germany leading in approvals. ESMA maintains a public CASP register for verification.
The grandfathering period allows existing crypto-asset service providers to continue operations while transitioning to full compliance. Deadlines vary by jurisdiction:
- Netherlands: July 1, 2025
- Italy: December 30, 2025
- Germany, Austria: December 31, 2025
- Maximum allowed: July 1, 2026
What MiCA Covers
MiCA regulates crypto-assets that are not financial instruments:
- Asset-Referenced Tokens (ARTs): Stablecoins backed by multiple assets or commodities
- E-Money Tokens (EMTs): Single fiat currency-backed stablecoins (must maintain 1:1 reserves, instant redemption at face value)
- Other Crypto-Assets: Utility tokens, governance tokens, meme coins
What MiCA Does NOT Cover
Security tokens fall outside MiCA—they're regulated under:
- MiFID II (Markets in Financial Instruments Directive)
- Prospectus Regulation
- National securities laws
- DLT Pilot Regime
MiCA also has limited coverage of DeFi protocols and NFTs—the Commission dropped "MiCA II" plans in mid-2025 in favor of enforcing existing rules.
MiCA Service Provider Licenses (CASPs)
If you provide crypto-asset services in the EU, you need CASP authorization:
| Service | Description |
|---|---|
| Custody | Safekeeping crypto-assets on behalf of clients |
| Trading Platform | Operating an exchange or marketplace for crypto-assets |
| Exchange | Crypto-to-fiat or crypto-to-crypto conversion services |
| Execution | Executing orders for crypto-assets on behalf of clients |
| Advisory | Providing investment advice on crypto-assets |
| Portfolio Management | Managing discretionary crypto portfolios |
| Transfer Services | Transferring crypto-assets on behalf of clients |
| Placement | Placing crypto-assets on behalf of issuers |
Key Features:
- EU passport: License in one member state, operate across all 27
- Minimum capital requirements by service tier: €50K (advisory, order execution) / €125K (custody, exchange, trading platform operation) / €150K (proprietary trading), plus higher of fixed amount or 1/4 of prior year's fixed overheads
- Governance, compliance, and IT security requirements
- Consumer protection and disclosure rules
- Travel Rule compliance (TFR) for transaction data exchange
- Personal liability for executives in case of violations
Penalties for Non-Compliance:
- Administrative fines up to €5M or 3–12.5% of annual turnover
- Public disclosure of violations
- Potential ban from crypto-related roles for executives
Whitepaper Requirements
As of December 23, 2025, crypto-asset whitepapers must be submitted in iXBRL format for machine-readability. ESMA published the XBRL taxonomy in August 2025. Required disclosures include:
- Token functionality and associated risks
- Underlying technology description
- Issuer information and governance
- Reserve composition (for ARTs/EMTs)
DLT Pilot Regime: From Sandbox to Scale
Effective: March 23, 2023 Duration: Initial 3-year period, extendable up to 6 years total (until 2029) Status: Active with proposed expansion
The DLT Pilot Regime allows tokenized securities to be issued and traded on blockchain infrastructure under a modified regulatory framework. After a slow start, 2025 saw significant momentum.
Current Operators (December 2025)
Six DLT Market Infrastructures are now authorized:
| Operator | Type | Country | Blockchain | Notes |
|---|---|---|---|---|
| CSD Prague | DLT SS | Czech Republic | Permissioned | First authorized CSD |
| 21X AG | DLT TSS | Germany | Polygon (public) | First TSS license, Q1 2025 launch |
| 360X AG | DLT TSS | Germany | D7 platform | Deutsche Börse partnership |
| UAB Axiology DLT | DLT TSS | Lithuania | — | H2 2025 authorization |
| Lise SA | DLT TSS | — | — | H2 2025 authorization |
| Securitize Europe | DLT TSS | Spain | Avalanche | First public-chain TSS, US market links |
December 2025 Proposed Amendments
The European Commission introduced significant amendments to the DLT Pilot as part of financial market reforms:
Scale and Scope:
- Remove product-specific issuance and market cap thresholds
- Expand eligibility to all financial instruments
- Increase aggregate cap from €6B to €100B per operator
- Simplified regime for operators under €10B
Participants and Services:
- Licensed CASPs with trading platforms can operate DLT venues
- New "DLT notary" and "DLT account keeper" services
- CSDs can perform specific services outside complete CSD environment
Settlement:
- Permit settlement in MiCA-licensed euro stablecoins
- Path toward central bank money settlement (ECB pilots ongoing)
What DLT Pilot Enables
- DLT Multilateral Trading Facility (DLT MTF): Trading platform for DLT-based securities
- DLT Settlement System (DLT SS): Settlement infrastructure without traditional CSD
- DLT Trading and Settlement System (DLT TSS): Combined trading and settlement on single platform
Current Eligible Securities (Until Amendments Pass)
| Security Type | Threshold |
|---|---|
| Shares | Market cap < €500M per issuer |
| Bonds (non-sovereign) | Issuance size < €1B |
| UCITS Units | < €500M (assets under management) |
Aggregate limit: €6B total value per DLT market infrastructure at time of admission/recording. When aggregate value reaches €9B, operator must activate transition (exit) strategy.
Key Exemptions Granted
The DLT Pilot allows targeted exemptions from specific provisions of:
- MiFID II / MiFIR (certain trading venue requirements)
- CSDR (central securities depository requirements)
- Intermediary and participant requirements
These are specific derogations, not blanket exemptions—each must be justified in the application and approved by the national competent authority.
In exchange for:
- Enhanced monitoring and reporting to national competent authorities
- Robust investor protection and compensation measures
- Mandatory transition planning requirements
- Quarterly reports to national authority, annual reports to ESMA
How to Use DLT Pilot
- Apply to National Regulator: BaFin (Germany), AMF (France), CSSF (Luxembourg), etc.
- Demonstrate Compliance: Technology resilience, governance framework, investor protection
- Receive Specific Authorization: Tailored exemptions granted based on business model
- Operate Under Monitoring: Quarterly operational reports
- Transition Planning: Documented plan for pilot expiry or transition to permanent regime
Country-Specific Frameworks
While EU regulations provide the baseline, implementation and local enhancements vary significantly.
Germany
Regulator: BaFin (Federal Financial Supervisory Authority) Key Law: eWpG (Electronic Securities Act)
Germany's eWpG (effective June 2021) allows:
- Fully dematerialized electronic securities (no paper certificates required)
- Crypto securities registered on decentralized public blockchains
- Integration with traditional central register system
Scope Expansion:
- June 2022: KryptoFAV added crypto fund units
- Planned: ZuFinG (Future Financing Act) to add electronic shares
Market Activity (2025):
- 21X received first DLT TSS license, launching regulated tokenized securities exchange
- KfW issued blockchain-based digital bond under eWpG
- Commerzbank partnered with Crypto Finance for institutional BTC/ETH trading
- ~45 crypto firms operating (exchanges, tokenization platforms, security)
Advantages:
- Clear, comprehensive legal framework
- Strong regulatory certainty and predictability
- Large institutional investor market
- BaFin experience with crypto regulation
- First DLT Pilot TSS licenses issued
Process:
- Maintaining a crypto securities register is a licensed financial service under KWG
- Issuer appoints a licensed crypto securities registrar (Kryptowertpapierregisterführer), or issuer itself obtains the license to act as register keeper
- Securities are created upon entry in the register
- BaFin notification required for public offerings
- Standard EU prospectus requirements apply
France
Regulator: AMF (Autorité des marchés financiers) Framework: PACTE Law + Blockchain Ordinance
France has been active in tokenization innovation:
- 2017: Blockchain Ordinance enabled DLT for unlisted securities
- 2019: PACTE Law created optional ICO visa regime
- 2020: Extension to fund units on blockchain
- 2024–2025: AMF acting as national competent authority for MiCA, actively licensing CASPs
- 2025: AMF/Consob joint position paper proposing DLT Pilot improvements
Advantages:
- AMF actively engaged with tokenization innovation
- Strong fintech and crypto ecosystem (Paris)
- Joint regulatory leadership with Italy on DLT reform
- Active DLT Pilot participation expected
Luxembourg
Regulator: CSSF (Commission de Surveillance du Secteur Financier) Framework: Blockchain Laws I–IV
Luxembourg has strategically positioned itself as the EU tokenization hub with progressive legislation:
- Blockchain Law I (2019): Enabled DLT for securities account maintenance and circulation
- Blockchain Law II (2021): Allowed issuance of dematerialized securities on DLT
- Blockchain Law III (2023): Enhanced framework for full dematerialization
- Blockchain Law IV (December 2024): Major expansion—unlisted equity securities, fund units, new control agent function
Blockchain Law IV Key Features:
- Explicitly authorizes digital management of unlisted equity securities including fund units
- Creates "control agent" role (can be transfer agent, depositary, or investment firm)
- Reduces intermediaries in fund operations
- Control agent handles: securities issuance account, custody chain monitoring, reconciliation
Market Milestones (2025):
- Franklin Templeton launched first fully tokenized UCITS (Franklin OnChain U.S. Government Money Fund)
- Apex Group acquired majority stake in Tokeny
- FundsDLT facilitating tokenized fund distribution with major institutions
- Law of 6 February 2025 implemented MiCA enforcement powers
Advantages:
- Europe's largest fund domicile (€7T+ AUM)
- Deep CSSF expertise in investment funds
- Comprehensive service provider ecosystem
- English widely used in business and legal documentation
- Most advanced legal framework for fund tokenization
- Strong investor protection reputation
Practical: Most EU fund tokenization projects choose Luxembourg for the combination of regulatory clarity, Blockchain Law IV innovations, and service provider depth.
Liechtenstein
Regulator: FMA (Financial Market Authority) Framework: TVTG (Token and Trustworthy Technology Act, "Blockchain Act")
The TVTG (effective January 2020) provides:
- Comprehensive token economy framework covering entire token lifecycle
- Any right (including real assets) can be represented as tokens
- Clear legal validity and enforceability of DLT transactions
- Specific service provider categories and licensing
Advantages:
- Most advanced and flexible token legislation in Europe
- EEA member (full EU/EEA market access via passporting)
- Business-friendly jurisdiction with fast incorporation
- Responsive regulatory engagement and short approval timelines
Consideration: Smaller domestic market, but excellent for structuring cross-border offerings. Often used in combination with Luxembourg for hybrid structures.
Switzerland (Non-EU Reference)
Regulator: FINMA (Swiss Financial Market Supervisory Authority) Framework: DLT Act (2021)
While not an EU member, Switzerland remains relevant for comparison and cross-border structures:
- Clear security token framework under existing securities law
- DLT trading facilities licensed (SIX Digital Exchange operational)
- Ledger-based securities (Registerwertrechte) with full legal recognition
Advantages:
- Most mature DLT legal framework globally
- Strong crypto and blockchain ecosystem
- High legal certainty and enforceability
Consideration: Separate regulatory process from EU—no automatic passporting. Requires specific structuring for EU investor access.
EU Tokenization Structure Options
Option 1: Luxembourg RAIF + Blockchain Law IV
EU/Global Investors
↓
Luxembourg RAIF
(Reserved AIF)
↓
Tokenized Units
(Control Agent)
↓
Underlying Assets
Best for: Professional/qualified investors, faster time-to-market, flexible investment strategy, €100K+ minimum tickets
Timeline: 4–8 weeks to launch Key benefit: No pre-approval required from CSSF, streamlined issuance with control agent under Blockchain Law IV
Note: This uses Luxembourg's domestic DLT framework (Blockchain Laws I–IV), not the EU DLT Pilot Regime. The DLT Pilot covers only UCITS units (not AIFs like RAIFs) for trading/settlement exemptions. RAIFs can be tokenized and managed on DLT under Luxembourg law, but secondary trading via DLT Pilot infrastructure requires the instrument to fall within Pilot scope.
Option 2: German SPV + eWpG
German/EU Investors
↓
German GmbH
(or AG/UG)
↓
Crypto Securities
(eWpG registered)
↓
Asset(s)
Best for: German investor base, single-asset deals (especially real estate), maximum legal clarity under German law
Timeline: 8–12 weeks including BaFin coordination Key benefit: Strong legal certainty, familiar structure for German institutions
Option 3: DLT Pilot TSS (New for 2025)
EU Investors
↓
DLT TSS Operator
(21X, Securitize, etc.)
↓
Tokenized Securities
(Trading + Settlement)
↓
Asset(s)
Best for: Secondary market liquidity, institutional-grade infrastructure, smaller issuers seeking regulated exchange access
Timeline: Depends on operator onboarding (weeks to months) Key benefit: Integrated trading and settlement, regulatory clarity, growing operator ecosystem
Option 4: Multi-Jurisdiction (Global Offering)
US Investors → US Entity (Reg D/S) ──┐
│
EU Investors → Luxembourg RAIF ──────┼──→ Holding Company → Asset
│
MENA Investors → UAE/Bahrain Entity ─┘
Best for: Global capital raise across multiple investor bases, maximum distribution flexibility, larger offerings ($10M+)
Timeline: 3–6 months for full structure Key benefit: Access to US, EU, and MENA capital simultaneously
Note: Multi-jurisdiction structures require careful coordination of securities exemptions and tax treatment across all relevant countries.
Prospectus Requirements
When Required
EU Prospectus Regulation (2017/1129) requires a prospectus for:
- Public offerings of securities to retail investors
- Admission to trading on EU regulated market
Exemptions (No Prospectus Required)
| Exemption | Condition |
|---|---|
| Qualified investors only | Offer limited to professional/institutional investors |
| Limited audience | Fewer than 150 non-qualified investors per member state |
| High minimum ticket | Minimum investment €100,000 per investor |
| Small offering | Total consideration under €8M (over 12-month period) |
| High denomination | Securities denominated at €100,000+ per unit |
Important change from June 5, 2026: The small offering threshold increases to €12M as the new EU baseline. However, member states may opt to set a lower threshold of €5M. Check national implementation before structuring.
Tokenization-Specific Disclosures
For tokenized securities, standard prospectus rules apply with additional requirements:
- Technology and DLT risk disclosures
- Smart contract functionality descriptions
- Custody and wallet arrangements explained
- Secondary market liquidity risks
- Operational and cyber security risks
- Private key management procedures
Practical Compliance Steps
Step 1: Structure Selection
| Factor | Key Questions |
|---|---|
| Investor Base | Which countries? Qualified investors only or retail? |
| Asset Type | Real estate, private equity, credit, infrastructure? |
| Offering Size | Under €8M? €8M–€50M? Over €50M? |
| Liquidity Needs | Secondary trading required? Timeline for exits? |
| Timeline | Standard (3–6 months) or accelerated? |
| Regulatory Appetite | Conservative or innovative structure? |
Step 2: Jurisdiction Selection
Choose Luxembourg if:
- Fund structure needed or preferred
- Multiple investor types (institutional + HNW)
- Targeting institutional capital
- Multi-asset or blind pool strategy
- Want to leverage Blockchain Law IV benefits
Choose Germany if:
- German asset or German investor focus
- Corporate/SPV structure preferred
- Single-asset tokenization
- Want access to DLT Pilot TSS operators (21X, 360X)
Choose Liechtenstein if:
- Maximum structuring flexibility needed
- Innovative or novel token structure
- Fast timeline priority
- EEA access sufficient
Step 3: Regulatory Engagement
Most EU regulators offer pre-application support:
- Pre-application meetings (formal or informal)
- Sandbox or innovation hub access
- Written guidance on novel structures
- Dedicated fintech/DLT contact points
Recommendation: Always engage early with the relevant regulator. Most are supportive of well-prepared tokenization projects. ESMA conducted 230+ crypto business audits in H1 2025—be prepared.
Step 4: Service Provider Selection
Essential service providers for EU tokenized offerings:
| Provider | Role |
|---|---|
| Legal counsel | Local + EU securities law expertise |
| Fund administrator | NAV calculation, investor services (if fund) |
| Transfer agent/registrar | Token holder registry, corporate actions |
| Control agent | DLT oversight and reconciliation (Luxembourg) |
| Custody solution | Qualified custodian for digital assets |
| KYC/AML provider | Investor onboarding, ongoing monitoring |
| Technology platform | Token issuance, cap table, investor portal |
| Auditor | Annual audit, regulatory reporting |
Timeline and Costs
Typical EU Tokenized Fund Launch
| Phase | Duration | Estimated Cost |
|---|---|---|
| Structuring & Legal | 4–8 weeks | €30K–€80K |
| Regulatory Filing/Setup | 4–12 weeks | €10K–€30K |
| Platform Integration | 2–4 weeks | €15K–€50K |
| Investor Onboarding Setup | 2–4 weeks | €5K–€15K |
| Total | 3–6 months | €60K–€175K |
Note: Costs are indicative and vary significantly based on structure complexity, jurisdiction, and service provider selection. Complex multi-jurisdiction structures or DLT Pilot applications may exceed these ranges.
Ongoing Annual Costs
| Item | Estimated Annual Cost |
|---|---|
| Fund administration | 0.05%–0.15% of AUM (min €15K–€30K) |
| Regulatory reporting & compliance | €5K–€15K |
| Annual audit | €10K–€30K |
| Platform/technology | €12K–€36K |
| Legal/regulatory updates | €5K–€15K |
| Total ongoing | €50K–€130K + AUM fees |
Regulatory Roadmap 2025–2027
| Date | Event |
|---|---|
| December 2025 | Commission DLT Pilot amendments proposed |
| Q1 2026 | Expected Commission report on DLT Pilot |
| June 5, 2026 | New prospectus exemption threshold: €12M (or €5M national option) |
| June 2025 | MiCA interim report (Commission) |
| July 2026 | Maximum grandfathering deadline for CASPs |
| 2026 | DAC 8 crypto tax reporting obligations commence |
| June 2027 | MiCA comprehensive review report |
| 2029 | Original DLT Pilot Regime expiry (likely extended/made permanent) |
Key Takeaways
-
MiCA is operational: 40+ CASP licenses issued, active enforcement, Travel Rule compliance required
-
DLT Pilot is scaling: Six operators now licensed, December 2025 proposals to expand limits to €100B and all financial instruments
-
Security tokens = securities: Full EU securities law applies—MiFID II, Prospectus Regulation, and national laws govern tokenized investment products
-
Luxembourg leads fund tokenization: Blockchain Law IV (2025) with control agent function, first tokenized UCITS launched
-
Germany leads DLT infrastructure: First TSS licenses (21X, 360X), eWpG expanding to cover more asset classes
-
Prospectus exemptions available: Qualified investor offerings, small raises under €8M, and high minimum tickets can avoid full prospectus
-
Engage regulators early: Most EU regulators are supportive—ESMA conducted 230+ audits in H1 2025, so preparation matters
-
Plan for ongoing compliance: Budget for administration, reporting, audit costs, and regulatory evolution from the outset
Planning a tokenized offering for EU investors? Book a consultation to discuss the optimal structure for your project.