The European Central Bank is charting a cautious path toward tokenizing Europe’s capital markets, arguing that the gains from distributed ledger technology (DLT) hinge on anchoring transactions in central bank money, ensuring interoperable infrastructures, and maintaining a robust regulatory framework.

In its latest Macroprudential Bulletin, the ECB notes that tokenization could deepen the EU’s savings and investments union, but warns gains depend on policy action keeping pace with evolving risks. The stance signals a measured push to modernize market plumbing without compromising financial stability or monetary control.

Key takeaways

• Tokenization could streamline the issuance-to-settlement chain and boost liquidity, but true gains require interoperable platforms and central bank money for settlement, not just private or commercial instruments.
• Early evidence from tokenized bonds points to lower borrowing costs and tighter bid-ask spreads, yet these improvements depend on scale, risk controls, and market adoption.
• Tokenized money market funds and euro-denominated stablecoins are analyzed as experiments in on-chain cash-like instruments, bringing new operational vulnerabilities alongside familiar liquidity risks.
• MiCA-compliant euro stablecoins could influence sovereign-bond demand and market resilience, depending on how issuers meet deposit and reserve requirements.
• Across five Bulletin pieces, the ECB stresses that tokenization can support a more integrated capital market only if policy, prudential rules, and central-bank infrastructure evolve in tandem.

Tokenized capital markets: Conditions and expected benefits

The ECB’s analysis outlines how tokenized assets could rewire the issuance-to-settlement chain by moving both securities and cash onto compatible ledgers and by automating corporate actions. By doing so, the authors argue, operational frictions tied to multiple intermediaries and legacy systems could be reduced, potentially unlocking improved secondary liquidity. Yet the potential gains hinge on avoiding a patchwork of incompatible platforms and ensuring that central bank money—not merely commercial bank money or privately issued tokens—can be used for settlement in tokenized markets.

One article in the Bulletin highlights that tokenization and DLT are moving from concept to early-scale deployment, but the benefits will be realized safely only if European policy action keeps pace. This framing underscores the balance policymakers are seeking: enabling innovation while preserving financial stability and monetary integrity. For market participants, that means pilots and gradually expanded use cases rather than rapid, broad-based deployment.

The Bulletin also flags the need for robust interoperability standards and risk governance to prevent fragmentation as tokenized infrastructure expands. In practical terms, that could mean common settlement rails, standardized corporate-action workflows, and clear rules on settlement finality and collateral management across platforms.

Tokenized MMFs and euro stablecoins under the lens

The bulletin treats tokenized money market funds (MMFs) as a parallel set of experiments that largely mirror the liquidity and run-risk profile of traditional MMFs, but with added operational vulnerabilities inherent to on-chain structures. The analysis invites scrutiny of how such funds would behave under stress and how they interact with on-chain cash-like instruments during adverse conditions.

A separate piece examines euro-denominated, MiCA-compliant stablecoins and their potential impact on sovereign debt markets. Depending on whether issuers meet deposit and reserve requirements, these on-chain tokens could act as a liquidity buffer in turbulent times or, conversely, become a channel for bank contagion. The report emphasizes the regulatory hinge: the way deposits, reserves, and governance are structured will shape how these stablecoins influence demand for government bonds and overall market stability.

Broader implications and what to watch

Together, the five pieces in the Bulletin lay out a clear, conditional path for tokenization: it can support Europe’s goal of a more integrated and efficient capital market, but only if policy direction, prudential oversight, and central-bank infrastructure evolve in lockstep. The ECB’s nuanced stance reflects an intention to reap potential benefits while keeping a tight line on risk management, liquidity resilience, and monetary integrity as tokenized formats scale beyond flagship deals and select issuers.

For investors and market builders, the early signals are instructive. Tokenized bonds showing lower borrowing costs in initial deployments suggest real efficiency gains from streamlined settlement and enhanced transparency. Yet those advantages are not guaranteed to persist once activity broadens: scale, legal clarity, and robust liquidity mechanisms will determine whether the benefits are durable or merely episodic. The same tension applies to tokenized MMFs and stablecoins, where innovation can improve access to liquidity but must not outpace safeguards around reserve adequacy and systemic risk.

Policymakers appear determined to preserve a centralized architectural logic—anchoring settlements in central bank money and ensuring regulatory clarity—while allowing the market to experiment with tokenized formats. The coming months could bring pilot programs, shared standards, and possible adjustments to settlement infrastructures, as Europe weighs how best to harmonize technology, law, and prudential rules.

Readers should watch how the ECB formalizes these concepts in concrete policy and industry guidance, and how market participants respond to any push toward standardized cross-platform settlement rails. The balancing act between innovation and stability will continue to shape the pace and scope of tokenized instruments across Europe.

The ECB did not respond to Cointelegraph for comment by publication.

The CEO of StarkWare, the once-$8 billion Israeli company behind Ethereum-based blockchain Starknet, announced layoffs and a full corporate restructuring today. Monthly revenue on its flagship network has collapsed more than 98% from its peak.

In November 2023, Starknet’s on-chain revenue peaked near $5.8 million within a single month. This month, it is on track for approximately $100,000. 

In other words, the network that once generated $187,000 in daily fees now generates about $3,500 per day. StarkWare declined to disclose the number of layoffs.

StarkWare, founded in Israel in 2018, develops Starknet, an Ethereum layer 2. For disambiguation, there is no StarkWave entity, a common misnomer that circulates online.

Starknet’s STRK token launched via airdrop in February 2024 and briefly traded to $4.41. It’s since fallen to $0.033, giving it a market capitalization of $187 million. That’s a 91% decline from its $2 billion market cap in March 2024.

StarkWare CEO: We are downsizing

CEO Eli Ben-Sasson posted his internal memo to X, telling staff the company had grown too large.

“Very sadly, as part of this process, we are downsizing,” he said as he fired staff. “Our new strategy requires that we move fast, and we’re too big and too inefficient for that.”

StarkWare raised $100 million at an $8 billion valuation in May 2022, quadrupling its size from $2 billion in a round six months prior. Although the company hasn’t updated its valuation in today’s downsizing announcement, it would probably be embarrassing relative to those 2022 figures.

GreenOaks Capital and Coatue were lead investors in the company. Earlier backers included Sequoia Capital, Paradigm, Founders Fund, as well as crypto dumpster fires Three Arrows Capital and Sam Bankman-Fried’s Alameda Research. 

StarkWare raised more than $260 million over its lifetime — more than the current market cap of STRK.

COO Oren Katz has submitted his resignation and departs at the end of this month.

A split and a sunset

The restructuring splits StarkWare into two independent business units. An applications division, led by Chief Product Officer Avihu Levy, will chase revenue directly. A Starknet development unit, led by Product Head Tom Brand, will continue core protocol work.

Jito Foundation has signed a memorandum of understanding with Korean digital asset custodian KODA to explore institutional custody and staking support for JitoSOL in the local market. 

According to Monday’s announcement, the agreement includes outreach to institutional investors and the development of compliant custody and staking pathways.

It comes as South Korea’s Financial Services Commission is expected to finalize a digital asset regulatory framework later this year.

In February, the foundation said it would work with Hanwha Asset Management to explore a JitoSOL exchange-traded fund in South Korea, pending regulatory approval. Marc Liew, head of APAC at Jito Foundation, told Cointelegraph:

We are seeing significant interest from two main camps: large financial firms looking to build the next generation of wealth management products, and institutional entities that are interested in the yield-bearing nature of JitoSOL for their corporate treasuries. 

KODA provides custody infrastructure including cold storage, MPC-based key management and institutional staking, carrying $20 million in digital asset insurance coverage. The company is backed by KB Kookmin Bank and other ininvestors andolds a registered VASP license and ISMS certification.

“Through KODA’s institutional-grade vaulting system, the KODA interface will allow the client to mint JitoSOL directly from their SOL holdings,” Liew said.

Jito is a liquid staking protocol on the Solana (SOL) network where users stake SOL in exchange for JitoSOL, a token usable across decentralized finance applications. The Jito Foundation supports development, partnerships and institutional outreach.

JitoSOL has a market capitalization of about $930 million, according to CoinGecko data. The token already has institutional exposure in Europe through a 21Shares exchange-traded product, while custodians including BitGo and Hex Trust support staking directly from custody accounts.

Related: Grayscale debuts Solana ETF, joining Bitwise in SOL staking ETF race

Seoul tightens crypto market controls

South Korean regulators and policymakers are pushing for tighter controls on the crypto sector as they move toward a more structured regulatory framework.

In January, the country approved changes to its crypto licensing regime, tightening requirements for virtual asset service providers and expanding oversight to include major shareholders. In March, policymakers followed with a proposal to cap ownership stakes in domestic exchanges at 20%, part of wider efforts to impose stricter controls on market structure.

The regulatory push accelerated after a payout error at crypto exchange Bithumb in early February, when users mistakenly received 620,000 Bitcoin (BTC) instead of 620,000 Korean won, triggering a sell-off and exposing weaknesses in exchange oversight.

Following the incident, the country’s Financial Services Commission introduced stricter reconciliation requirements between exchanges’ internal ledgers and onchain balances.

Earlier this month, lawmakers began drafting legislation that would classify stablecoins as foreign exchange payment instruments and require tokenized real-world assets to be backed by assets held in trust. 

More recently, the Bank of Korea called for exchange-level “circuit breakers” and stronger internal controls, with the central bank warning that the industry lacks safeguards seen in traditional financial systems.

Magazine: Should users be allowed to bet on war and death in prediction markets?