Digital assets: tokenization, stablecoins, crypto securities and the digital euro

In depth12 min read · 19 sources

Digital assets are assets recorded as tokens on a digital register: crypto-assets such as Bitcoin, stablecoins, tokenized bonds and fund units, crypto securities and perhaps soon digital central bank money. Here you will learn which categories the EU's MiCA regulation and Germany's Electronic Securities Act distinguish, how tokenization and real-time settlement work, what a stablecoin issuer earns on its reserves and where the limits lie. As of October 2026.

Terms and categories

“Digital asset” is an umbrella term. Legally, what matters is what a token represents: a claim to money, to a basket of assets, to a security, or nothing but itself. The main categories in the EU:

An e-money token pegs its value to an official currency. Only e-money institutions and credit institutions may issue it, and holders can redeem it at par value at any time. An asset-referenced token bases its value on something else, such as gold or a combination of assets, and needs a reserve of assets. Other tokens include utility tokens, which give access to a service of the issuer, but also Bitcoin and Ether (BaFin, MiCAR 2024). MiCA does not cover unique, non-fungible tokens (NFTs), tokenized financial instruments (so-called security tokens) or tokenized deposits (BaFin, MiCAR guidance notice 2025).

In Germany, the Electronic Securities Act (eWpG) has allowed securities to be issued without a physical certificate since 2021: as a central register security or as a crypto security in a crypto securities register. This register must run on a tamper-proof recording system, typically a blockchain. Initially, the law covered electronic bearer bonds, and fund units as crypto fund units; anyone who keeps such a register needs a license under the German Banking Act (KWG) (BaFin, crypto securities 2023).

Public issuers have been issuing tokenized bonds for several years. In April 2021, the European Investment Bank issued a €100 million digital bond with a two-year term on the public Ethereum blockchain, under French law; it was paid for in digital central bank money in cooperation with the Banque de France (EIB 2021). According to BIS (2026), tokenized fund units, including those of money market funds, are being tested, for example as reserves for stablecoins and as collateral.

A stablecoin is meant to hold a fixed value. How well this works depends on the reserve: fiat-backed tokens are backed by bank deposits and short-term government securities, other designs by crypto-assets or merely by an algorithm with a sister token. Terra shows how quickly a weak construction can fall: it collapsed within three days in May 2022, wiping out around US$50 billion in market value (Liu et al. 2023).

The digital euro would be digital cash issued by the central bank, intended to complement banknotes and coins. On October 30, 2025, the ECB decided on the next phase of the project: if the regulation is adopted in 2026, a pilot could start in mid-2027 and a first issuance could be possible in 2029; the ECB will only decide on issuance once the law is in place (ECB 2025). On July 9, 2026, the European Parliament adopted its negotiating mandate by 416 votes to 169 with 22 abstentions; the aim is to conclude the procedure by the end of 2026 (Banca d'Italia 2026). In September 2026, Parliament and Council were still apart on the compensation model, distribution and holding limits (European Parliament 2026).

Infrastructure: DLT, smart contracts, settlement

• Distributed ledger: a distributed ledger is maintained jointly by many computers; a blockchain is the best-known design. Public networks are open to everyone, private ones only to admitted participants.
• Tokenization: in tokenization, an asset is represented digitally on a programmable platform. According to BIS (2025), it combines messaging, reconciliation and settlement in a single step.
• Smart contracts: programs on the ledger that carry out agreed steps by themselves (paying a coupon, calling for collateral, exchanging tokens for money).
• Settlement: in the EU, securities transactions are currently settled two days after the trade (T+2), and from October 11, 2027 after one day (ESMA, T+1 2026). On a shared ledger, atomic settlement is possible: token and money change hands in the same step or not at all, i.e. delivery versus payment in real time.
• Interoperability: there are many separate blockchains. Stablecoins currently cannot guarantee exchange at par across issuers and blockchains in every situation (BIS 2026).
• Oracles: an oracle brings outside data (prices, interest rates, events) into a smart contract. If it is wrong or manipulated, the contract calculates with wrong values.

For securities on DLT, the EU has had a DLT pilot regime for trading and settlement systems since March 23, 2023. Only shares of companies with a market capitalization below €500 million and bonds with an issue size below €1 billion are eligible, with a total of at most €6 billion. By the end of May 2025, ESMA counted three infrastructures in the Czech Republic and Germany, with six share issues totaling around €11.9 million and one bond of up to US$500 million; it recommended higher thresholds and a permanent framework (ESMA, DLT Pilot Regime 2025).

Worked example: what faster settlement saves

Between trade and settlement, both sides bear a risk: if the counterparty defaults, the trade has to be replaced at a new price. In addition, the seller ties up capital while the money is in transit. Both grow with the number of days n.

Stablecoins: reserves, income, runs

According to BIS (2026), the market value of stablecoins was around US$320 billion at the end of May 2026; 99.4% of the fiat-backed ones are pegged to the US dollar. The BIS estimates the transaction volume in 2025 at US$28 trillion, and far less excluding transfers between wallets of the same owner. Issuers' holdings of US Treasury bills are comparable to those of large countries and of government money market funds.

In the EU, fixed rules apply to e-money tokens. At least 30% of the funds received are always held in segregated accounts at credit institutions, the rest in secure, highly liquid assets with low market, credit and concentration risk in the same currency. Neither the issuer nor a crypto-asset service provider may grant interest; any remuneration that depends on the holding period also counts as interest (MiCA 2023). In the US, the GENIUS Act has regulated payment stablecoins since July 18, 2025 (White House 2025).

The BIS is skeptical about stablecoins. In its view, they fail the three tests of sound money, namely singleness (acceptance at par), elasticity (payments without gridlock) and integrity (protection against financial crime), and could at best play a supporting role (BIS 2025):

Benefits and limitations

The table is a qualitative assessment, not a measurement.

A key hurdle is legal certainty: a token only helps if it is clear what right it represents, who is liable and what happens in insolvency. Besides the underlying asset, the issuer, the register and the custodian therefore matter, as with any issuer risk. Concentration is already evident today: almost all stablecoins are tied to the US dollar, and according to BIS (2026), they account for a considerable share of illicit activity on blockchains.

Supervision: MiCA, ESMA and the BIS

• MiCA: the rules for asset-referenced and e-money tokens have applied since June 30, 2024, the rest since December 30, 2024. Issuers publish a white paper, an information document on the token (BaFin, MiCAR 2024); asset-referenced tokens of up to €5 million on average over twelve months do not require authorization (BaFin, ART and EMT guidance notice 2025).
• ESMA: the European securities regulator oversees the DLT pilot regime and reports on its effects (ESMA, DLT Pilot Regime 2025).
• BIS: the central banks' bank proposes a unified, tokenized ledger that brings together central bank reserves, bank deposits and government bonds (BIS 2025).

For funds, tokenized units are mainly a question of the register. The investment policy, costs and risk remain those of the fund. How an ETF itself works is explained in ETF basics.

Advanced: runs, interest rate risk, competition

A stablecoin promises redemption at par but holds assets that cannot be sold at par in every situation. Those who redeem early get the full amount; those who come late bear the losses from the sales. This creates an incentive to run, as with a bank without deposit insurance. Even short-term bonds lose value when interest rates rise, by roughly duration times the change in rates:

On public blockchains, all participants see each other's movements. According to Liu et al. (2023), this accelerated the run during the collapse of Terra: investors could watch one another, and when some large holders reallocated their positions on May 7, 2022, others followed. Wealthier and more sophisticated investors withdrew first and lost less. The data themselves are a form of alternative data; Griffin and Shams (2020) also used them to trace Tether flows.

What the research shows

• Stablecoins as private money: Gorton and Zhang (2023) compare stablecoins with the private banknotes of the 19th century. Such money is not always accepted at par, and its issuers are unregulated banks prone to runs; as responses, they discuss issuance only through banks, one-to-one backing with safe assets, and public digital money.
• Consequences for banks: according to Liao and Caramichael (2022), how stablecoins change deposits and lending depends on where the money comes from and how the reserves are invested. A model like a narrow bank, which holds only safe reserves, gives the most stable peg but draws deposits away from banks; with safe, liquid reserves, dollar stablecoins could even be a safe haven in crypto market crises.
• Stablecoins and crypto prices: during the 2017 boom, purchases with Tether followed price declines and lifted the Bitcoin price markedly; the patterns point to insufficient reserves ahead of month-ends (Griffin and Shams 2020).
• Smart contracts: according to Cong and He (2019), smart contracts can reduce information asymmetries and strengthen competition through more market entry. But because decentralized consensus distributes information to all participants, it can also make collusion easier; blockchains thus support a wider range of possible market outcomes.

Limitations and common mistakes

• Confusing the token with the underlying: a token on a bond is only as good as the issuer, the register and the legal position behind it.
• Stable does not mean safe: a stablecoin is a claim against an issuer with reserves, not a deposit covered by deposit insurance and not central bank money.
• Mistaking a price for liquidity: trading around the clock helps little if only a few buyers are around under stress.
• Mistaking a pilot for a market: volumes in the DLT pilot regime have so far been small, and many projects are experiments.
• Treating the legal position as settled: the digital euro, UCITS rules and parts of the MiCA implementation are in flux. The data in this article have a cut-off date.

This article puts terms, rules and research into context. It is not investment, legal or tax advice and not a recommendation for any token or platform.

How Portfolio Lab calculates

Portfolio Lab does not offer token analysis: no blockchain data, no stablecoin reserve reports, no review of smart contracts or registers. Crypto-assets enter the Backtest through their prices: as a ticker such as BTC-USD or as an asset class from the “Crypto” group, for example @BITCOIN or @ETHEREUM. For tokenized money market funds or bonds without their own price series, the conventional asset class can serve as a proxy, for example “Money market US dollar” (@GELDMARKT_USD): the token changes the register, not the return. More in the asset class methodology; Risk shows risk contributions.

This article explains a method; it is not investment or tax advice. Worked examples are simplified and rounded. All terms in the glossary.