Why the EU’s Crypto Laws Need a Reality Check
10.10.2025 12:00 2 min. read Alexander Zdravkov
Europe’s digital asset regulations may have a major oversight: they assume every token can be traded freely.
But a large category of digital assets – such as non-transferable company shares or revenue-sharing agreements – doesn’t fit that mold. This gap has left many tokenized instruments in legal uncertainty, caught between MiCA and MiFID II definitions that only address transferable assets.
According to findings from the EU Blockchain Sandbox, there’s now a way to close that gap. The solution lies in recognizing the concept of a “digital twin” – a tokenized version that mirrors the original, non-transferable asset without altering its nature. If the digital twin preserves the legal, technical, and contractual boundaries of the underlying asset, it shouldn’t automatically fall under MiCA or MiFID II as a new, tradable security.
This distinction matters because tokenization has outpaced regulation. Recording an asset on a blockchain doesn’t inherently change its legal status. A bond remains a bond, and a private company share remains a share – even if digitized. Problems arise only when developers introduce engineered transferability to boost liquidity. In that case, they create a new, tradeable financial instrument that could fall under stricter EU rules.
The Sandbox’s “digital twin test” now offers a practical guide:
- Check whether the token qualifies as a MiFID II financial instrument.
- If not, assess whether it falls under any MiCA categories.
- If neither applies, determine whether it represents a digital twin recognized under national law.
Crucially, the technical design must enforce non-transferability – not just through contractual restrictions, but through built-in mechanisms that prevent token transfers beyond the issuer or authorized parties. This ensures that non-transferable assets remain outside MiCA’s scope.
The Sandbox findings highlight the value of open dialogue between regulators and blockchain innovators. Instead of new laws, the EU needs clear guidance and consistent interpretation across member states. That would prevent unnecessary legal uncertainty, help issuers stay compliant, and keep tokenization activity within Europe rather than pushing it offshore.
In essence, tokenization should neither grant a regulatory loophole nor trigger unnecessary restrictions. With the digital twin framework, Europe now has a roadmap for bridging innovation and compliance – allowing the tokenized economy to grow under clear, predictable rules.
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