From Policy to Progress: Unlocking Europe’s Digital Asset Potential

Europe stands at a pivotal moment in the evolution of digital assets. With the Markets in Crypto-Assets Regulation (MiCAR) now firmly in place, the region has positioned itself as a global leader in regulatory clarity – an achievement that many other jurisdictions are still striving to replicate.

Despite this head start, questions remain about how Europe can effectively translate regulatory leadership into real-world market adoption, deeper institutional engagement and sustained innovation. Infrastructure across the ecosystem is steadily maturing and the market is seeing encouraging signs, such as the growth of Euro-denominated stablecoins as well as expanding digital asset capabilities among traditional financial institutions.

Variable Geography

Despite the EU-wide regulatory clarity offered by MiCAR, implementation and adoption of digital assets at the national level still varies significantly across Europe. A key reason for this uneven progress is the generally cautious risk appetite among traditional financial institutions, many of which remain hesitant to fully engage with digital assets beyond exploratory efforts.

Regulatory certainty alone has not been enough to overcome internal compliance hurdles, legacy technology constraints or wider cultural resistance at the top level within organisations. As a result, many tokenisation initiatives – particularly in capital markets – are still confined to pilot projects or controlled sandbox environments, rather than being scaled into production.

This fragmentation is further amplified by differing levels of digital infrastructure maturity, policy interpretation and public-private coordination across EU member states. Until these foundational gaps are addressed, the promise of a harmonised digital asset economy in Europe will remain only partially realised.

Which nations are leading the way?

While digital asset adoption in Europe remains uneven, there are clear signs of forward momentum that underscore the region’s real potential.

As the world’s second-largest investment fund centre and the most important private banking centre in the Eurozone, it is perhaps not surprising that Luxembourg has emerged as a notable hub for digital assets and tokenisation. Seen as a leader on blockchain in the EU, it passed its own blockchain legislation as early as 2019 as well as its more recent Blockchain IV Law on December 19, 2024. The European Investment Bank in Luxembourg was early to the industry pioneering digital bond issuance on the blockchain as early as 2021. Its financial regulator (CSSF) is open to dialogue with the industry and has taken a proactive stance. Towards the end of 2025, Luxembourg’s sovereign wealth fund, the FSIL, announced it wouldallocate 1% of its total investment portfolio in cryptocurrencies such as bitcoin, again signalling that the Grand Duchy is committed to digital assets on a long-term horizon.

Industry stalwarts such as Coinbase are now setting up shop in Luxembourg while Zodia Custody has chosen Luxembourg as its European hub. Ripple is also actively seeking an Electronic Money Institution (EMI) license in Luxembourg to launch its RLUSD stablecoin. Likewise, several major TradFi players – including asset managers and custodians – are actively pursuing tokenisation and digital fund initiatives. These include established financial institutions like Standard Chartered, Franklin Templeton, and UBS, as well as emerging players like6Monks, Securitize and Tokeny, which announced last May that Apex Group had taken a majority stake in the firm to catalyse widespread adoption of tokenisation.

Luxembourg is a top European jurisdiction for Crypto-Asset Service Providers (CASPs), combining regulatory clarity under MiCAR with an innovation-friendly environment. It has a favourable transitional regime compared to other EU Member States and exhibits strong alignment between regulatory oversight and technological progress. Luxembourg has also established an Innovation Hub to foster dialogue on digital finance. It explicitly allows distributed ledger technology across the entire fund lifecycle – from issuance and ownership transfer to trading and pledging – backed by legal clarity under MiCAR.

Germany, too, has made meaningful strides, particularly through BaFin’s licensing framework, which has enabled banks like DZ Bank and DekaBank to develop tokenisation services. Meanwhile, a growing number of European banking institutions, such as Société Générale and BNP Paribas, are experimenting with blockchain-based settlement and issuing tokenised securities, signalling institutional willingness to engage.

Other notable players include France, which has been vying for crypto-hub status in recent years, and the Netherlands, which benefits from a 6-month grandfathering period under MiCAR, and where substantial legal and financial expertise in digital assets has been built over the past decade.  The Dutch government and financial institutions such as ABN AMRO are actively working towards adapting regulations to accommodate tokenised assets and markets.

On the digital money front, preparations for a Digital Euro are picking up pace, focusing on technical readiness, with potential issuance targeted for 2029 if EU legislation is passed by 2026, allowing for pilot tests from 2027. There has also been an uptick in interest in and issuance of Euro-denominated stablecoins. In December of last year, Euro-denominated stablecoins surpassed $1 billion in circulating supply, according to industry data, marking a significant milestone. However, EUR-pegged stablecoins’ market cap represents less than 1% of that of dollar-pegged stablecoins, and momentum remains uneven across markets, sectors and use cases.

Circle’s EURC is steadily emerging as a regulated option for on-chain payments and settlements, while the approval of AllUnity’s MiCAR-compliant electronic money token (EURAU) under a joint venture from DWS, Flow Traders and Galaxy highlights Germany’s progress in regulated digital currency issuance.

These movements reflect a maturing ecosystem in which regulatory clarity, infrastructure readiness and institutional experimentation are beginning to converge – a signal that Europe’s digital asset ambitions are gradually taking shape.

What is the Future for Digital Assets in Europe?

While many financial institutions in the EU do now have teams working on tokenisation and digital assets, often this is still seen as something separate from the day-to-day business activities of the firm rather than being integrated into traditional workflows. If organisations truly want to embrace digital transformation and access the opportunities that this new asset class can bring, that balance now needs to shift.

To truly capitalise on its regulatory foundations, Europe must also now focus on bridging the gap between regulatory clarity and commercial impact. The European Securities and Markets Authority (ESMA) has a role to play in minimising the level of regulatory arbitrage between different EU member states. To that end, in late 2025 the European Commission launched an ambitious package designed to fully integrate EU financial markets. The measures are designed to remove barriers and unlock the full potential of the EU single market for financial services. This includes removing regulatory barriers to innovation related to distributed ledger technology. It amends the DLT Pilot Regulation (DLTPR) to relax limits, increase proportionality and flexibility, and provide legal certainty, in an attempt to encourage adoption of new technologies in the financial sector.

Meanwhile, last summer, the European Bank Authority published a No Action Letter on the interplay between the Payment Services Directive (PSD2/3) and MiCAR, as there remain overlaps between the two regimes. The letter proposes that CASPs in scope – in other words, those who transfer or custody electronic money tokens on behalf of clients – should obtain a Payment licence by March 2026. The letter has left some CASPs concerned or confused about the potential ramifications on their business models since the double licensing is undermining the legal certainty and clarity MiCAR was intended to bring about.

Momentum has rapidly picked up in the US under the Trump administration, with the UK also moving closer to defining its crypto regime and both Singapore and the UAE vying for the institutional digital asset crown. The moment has now arrived for the EU to enhance the strong foundations created by MiCAR and develop a more connected, scalable and innovation-friendly environment that brings digital assets into the financial mainstream.