ESMA Finds Tokenised Equities Still Depend on Offchain Ownership and Cash Settlement
Europe's securities regulator says most tokenised-equity structures remain wrapped, legally offchain and dependent on conventional cash settlement.
The value of tokenised equities grew from about €0.3 billion at the end of 2024 to €1.9 billion at the end of June 2026, according to the European Securities and Markets Authority. The 6.5-fold increase is rapid, but ESMA says the market remains negligible beside global equity markets and still relies heavily on conventional ownership and settlement arrangements.
The regulator's September 10 analysis is not a rule or enforcement action. It asks whether putting an equity representation on a blockchain is delivering the promised improvements in settlement, liquidity and corporate actions. Its answer is conditional: some automation is possible, but the benefits depend on legal design, interoperability and scale. ESMA.
Most structures wrap an existing share
ESMA distinguishes native issuance from wrapped tokenisation. In a native structure, the token itself is the legally recognised security. In a wrapped structure, an intermediary holds a conventional share and issues a token intended to represent an economic interest in it.
The report says wrapped structures predominate and native tokenised-equity issuance remains rare. That distinction determines what changes when the token moves. If the legal share register remains outside the blockchain, transferring a token may alter the holder's economic exposure without transferring legal title to the underlying equity.
This is more than terminology. Voting, dividends, insolvency claims and investor protection attach to the legal security and the contractual wrapper. A token interface can make trading easier while leaving those rights dependent on an offchain custodian, register or issuer.
Cash settlement often remains on another rail
The same split appears in settlement. ESMA describes hybrid arrangements in which the token moves onchain while payment takes place through conventional cash systems. The two legs then require reconciliation.
That design can digitise the asset record without producing atomic delivery versus payment, where the security and cash move together or neither does. It also keeps operating dependencies between a blockchain venue, banking rails and the records used to establish final ownership.
The report does not say tokenisation cannot improve post-trade processes. It says the benefit is design-specific. A structure that automates one leg while preserving manual or separate steps elsewhere may shift operational work instead of removing it.
Multiple wrappers can fragment liquidity
A conventional share can have several tokenised representations issued by different platforms or intermediaries. ESMA warns that those representations may not be fungible even when they refer to the same underlying company.
Separate pools can weaken market depth and price discovery. A price on one venue may not be immediately executable on another, and the cost of moving or redeeming between wrappers can become more important during stress. Those risks matter before the market reaches large scale because liquidity is most fragile when activity is divided among small venues.
Smart contracts add a separate operating risk. Programmable rules can automate restrictions, distributions and other corporate actions, but code errors and immutable execution can make mistakes difficult to reverse. Governance therefore still has to answer who can pause a contract, correct a record or compensate an investor.
Growth is evidence of activity, not completion
The €1.9 billion figure measures outstanding tokenised-equity asset value in ESMA's selected data, not trading volume or the value of all digital securities. It also does not show that tokenised structures are cheaper, more liquid or legally equivalent to traditional shares.
ESMA identifies plausible gains from programmability and transparent records, particularly if standards make platforms interoperable and if legal title and payment can be integrated more closely. The regulator's central finding is that those conditions are not automatic consequences of issuing a token.
The next evidence should distinguish native securities from wrappers, show where legal title sits, identify the settlement asset and measure liquidity across venues. Without those details, growth in token value says more about issuance activity than about a completed redesign of equity-market infrastructure.