The European Securities and Markets Authority opened a call for evidence on October 9, 2026, examining the use of tokenized collateral by central counterparties across the European Union. The review focuses on whether these digital representations of assets can meet existing standards for liquidity, legal enforceability, and operational availability when markets come under pressure or a clearing member defaults.

Stakeholders including clearinghouses, custodians, clearing members, banks, infrastructure operators, and technology providers have until January 15, 2027, to submit responses. ESMA plans to assess the feedback in the first quarter of 2027 before determining whether further regulatory or supervisory measures are required.

Core Questions on Liquidity and Access

Under the European Market Infrastructure Regulation, central counterparties collect margin and default fund contributions to manage counterparty risk. Eligible collateral must remain high quality, legally enforceable, highly liquid, and readily available in both normal and stressed conditions. ESMA is investigating whether tokenization alters this risk profile.

The consultation covers tokenized versions of assets held in traditional systems, often called digital twins, as well as assets issued directly on distributed ledger technology and hybrid arrangements. It also considers interactions with stablecoins, tokenized bank deposits, and central bank money.

Key points of inquiry include potential delays in transferring or redeeming tokenized assets, dependence on third-party service providers, and the ability of a clearinghouse to convert collateral into cash quickly after a default. Even assets that are liquid in conventional form may face additional frictions once represented on a blockchain.

Ownership Rights and Settlement Finality

Beyond liquidity, the authority is examining whether the transfer of a token confers clear ownership or enforceable rights over the underlying asset. In digital twin models, the token typically represents an asset that continues to exist within conventional custody or settlement systems. Assets issued natively on distributed ledgers may operate under different legal frameworks depending on the issuer and applicable rules.

ESMA seeks evidence on how client assets would remain identified, segregated, and protected across these models. It also asks whether technical separation on a ledger provides equivalent safeguards to traditional legal segregation. Settlement finality is another focus, particularly where distributed ledger records interact with established market infrastructure and must produce consistent, irrevocable outcomes.

The review does not propose expanding the categories of eligible collateral or introduce new binding requirements at this stage. Its purpose is to test whether current safeguards under existing rules adequately cover the methods used to hold and transfer these assets.

Market Developments Prompting the Review

The consultation follows practical steps already taken by European market participants. In July 2025, Eurex Clearing launched a distributed ledger technology-based collateral mobilization service developed with HQLAᵡ and Clearstream. JPMorgan executed the first live transaction on behalf of Dutch pension investor PGGM, moving securities from another custody location for use as margin at Eurex. The arrangement received regulatory non-objection from Germany’s Federal Financial Supervisory Authority.

Separately, the European Central Bank introduced Pontes in September, a system that enables settlement of tokenized asset transactions using central bank money and connects blockchain platforms with the Eurosystem’s TARGET services. Early participants included Deutsche Bank, Santander, and Clearstream. ESMA noted that such infrastructure could support tokenized collateral arrangements by linking new systems with existing settlement processes.

Next Steps and Industry Input

ESMA is requesting practical evidence on custody arrangements, redemption procedures, operational resilience during disruptions, valuation impacts, and any need for additional haircuts on certain tokenized assets. Responses will generally be published after the consultation closes unless confidentiality is requested.

The authority will then decide whether existing European market infrastructure rules remain sufficient or whether regulatory changes, supervisory guidance, or other measures are warranted. The process forms part of broader work on tokenization and aims to support safe development of these markets without compromising the protections required in central clearing.