Digital Assets and Decentralized Finance: Tokenized Securities, DLT Infrastructure, Mica and Their Market Impact on European Capital Markets

Abstract

This paper critically examines the impact of tokenization, decentralized finance (DeFi), and distributed ledger technology (DLT) infrastructures on the future of European capital markets, with a focus on the EU’s proposed Markets in Crypto-Assets Regulation (MiCA) and the DLT Pilot Regime. Drawing on theoretical perspectives in financial intermediation and regulatory governance, combined with empirical evidence from tokenization pilots in Germany, Luxembourg, and France, the study develops a conceptual framework that highlights three dynamics: efficiency gains, risk transmission, and regulatory mediation. The findings demonstrate that tokenization can reduce settlement times from T+2 to T+0 and lower transaction costs by up to 30%, yet liquidity challenges persist due to fragmented pilots and limited secondary trading. A forward-looking scenario analysis projects three possible outcomes for EU tokenized markets by 2030: a harmonized “digital capital union” under full MiCA implementation, fragmented “digital islands” under regulatory divergence, or global marginalization if arbitrage drives activity to Asia or the U.S. The paper contributes theoretically by integrating tokenization into debates on financial infrastructure and regulatory design, while offering practical policy recommendations on harmonization, interoperability, and global engagement. For industry and policymakers, the study highlights both the opportunities and systemic risks of tokenization, positioning Europe at a crossroads between leadership and peripherality in global digital capital markets.