Brussels – European capital markets are undergoing a significant push for greater independence and strength, spurred by the implications of Brexit and a desire to foster a more integrated financial ecosystem. The European Commission’s recently unveiled Market Infrastructure Package (MIP), presented on December 4, 2025, aims to revitalize the Capital Markets Union – now rebranded as the Savings and Investment Union (SIU) – but faces the challenge of overcoming existing fragmentation and underdevelopment. The Commission’s assessment paints a stark picture: the EU’s capital markets lag behind global competitors, burdened by a high number of stock exchanges, central securities depositories (CSDs), and central counterparties (CCPs).
The initiative comes as the EU seeks to reduce its reliance on London-based clearinghouses for euro-denominated transactions, a concern heightened after the UK’s departure from the European Union. While Brexit created an opportunity for the EU to build its own robust financial infrastructure, progress has been slow. The MIP represents a renewed effort to assert greater control over the region’s financial landscape and enhance its competitiveness on the world stage.
The core of the MIP focuses on easing cross-border licensing for market infrastructure providers, allowing them to expand their operations within the EU from existing decentralized hubs. This includes simplifying access for exchanges to offer services across member states, establishing a unified license for pan-European market operators, and streamlining access to trading platforms for brokers and asset managers. Settlement systems are also slated for easier cross-border operation.
Enhanced Oversight and a Centralized Approach
Alongside these liberalization measures, the MIP proposes a more centralized approach to supervision. The European Securities and Markets Authority (ESMA) will be significantly strengthened, gaining exclusive responsibility for overseeing all “significant” market infrastructure providers. While national authorities will retain oversight of smaller, nationally-focused entities – albeit with less harmonization – the goal is to create a more efficient and consistent regulatory architecture, mirroring the approach already in place for banking supervision. This increased regulatory scrutiny is expected to come with a substantial bureaucratic burden, both in terms of resources and personnel.
Digital Finance and the Integration of DLT
Innovation is also a key component of the package, with a particular focus on digital capital markets and the potential of Distributed Ledger Technology (DLT), commonly known as blockchain. The proposal envisions a future where securities of all types can be issued as tokens on a DLT and integrated into the existing system of regulated exchanges, CSDs, and CCPs. Payments related to securities trading would be facilitated through e-money tokens regulated under the Markets in Crypto-Assets (MiCA) regulation.
Changes to the Central Securities Depositories Regulation (CSDR) are central to this effort, expanding the definition of “immobilization” to encompass securities originally issued on a DLT, enabling their acceptance for collateral purposes. The European Central Bank (ECB) intends to accept DLT-based securities issued by CSDs as eligible collateral starting March 30, 2026, according to the proposal.
Harmonization Challenges and Legal Frameworks
However, the successful implementation of DLT-based securities hinges on harmonizing civil and insolvency law across the EU’s 27 member states. The legal status of DLT-based securities also remains a complex issue. Germany has already addressed this with its Law on Electronic Securities, classifying such securities as “crypto securities.” This approach is lauded for recognizing that tokens often do not fit neatly into traditional legal categories of property or rights, necessitating a fictional treatment – treating the DLT security as a tangible asset.
Other legal systems, particularly English law, appear to manage the properties of DLT securities – such as transferability and proof of ownership – without specific legislation. Legal opinions will be crucial in building trust in the ownership and creation of DLT securities. Uncertainty also remains regarding applicable law in cross-border transactions and the tokenization of securities held by CSDs operating under different legal frameworks. EU-wide harmonization of “token law” would strengthen national rights.
The European Union is taking steps to modernize its financial infrastructure, but significant legal and logistical hurdles remain. The MIP represents a bold attempt to create a more integrated, competitive, and resilient capital market, but its success will depend on the ability of member states to overcome fragmentation and embrace innovation.
As the MIP moves forward, the focus will be on the legislative process and the implementation of these new regulations. The coming months will be critical in determining whether the EU can truly establish a financial system that reflects its ambitions for economic sovereignty and global leadership.
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