From Pool to Payment: Building End-to-End On-Chain Securitisation in Europe

EU RegCORE Client Alert | EU Digital Single Market, financial services and crypto-assets

The EU has assembled several of the regulatory and infrastructure components necessary to support tokenised securitisation. Comparable developments in the United Kingdom create opportunities for interoperability, although the EU and UK legal frameworks remain distinct; this Client Alert focuses on EU and German law issues and notes the principal UK divergences. The commercial question is whether these components can be connected across the transaction lifecycle: from origination and asset transfer through issuance, settlement, servicing, reporting and redemption. A tokenised note alone does not achieve that connection. A genuinely end-to-end model must also determine which events produce the intended legal effects, and which remain subject to off-chain verification and decision-making.Regulation (EU) 2017/2402 of the European Parliament and of the Council of 12 December 2017 laying down a general framework for securitisation and creating a specific framework for simple, transparent and standardised securitisation (2017) OJ L 347/35 (SECR); Regulation (EU) 2022/858 of the European Parliament and of the Council of 30 May 2022 on a pilot regime for market infrastructures based on distributed ledger technology (2022) OJ L 151/1 (DLTPR); Directive 98/26/EC of the European Parliament and of the Council of 19 May 1998Show Footnote

DLT can alter the infrastructure through which a securitisation operates; it does not, by itself, change the requirements for legal effectiveness. A ledger entry may provide evidence, constitute an agreed instruction or, where legislation so provides, form part of a legally effective registration or transfer. Its consequences depend on applicable law, the authoritative register and transaction documents. Technical consensus alone is not an assignment, perfection step, discharge of an obligation, proprietary transfer or statutory settlement finality. This separation between execution and legal consequence governs the analysis below.

Several developments now make the distinction commercially important. Pontes has entered operation for eligible wholesale settlement; the securitisation framework is under review; the Commission has proposed widening the DLT Pilot Regime and modernising settlement-finality legislation. These independent workstreams could progressively enable a more connected securitisation lifecycle, but neither their adoption nor their availability to any particular transaction should be assumed.

The relevant question therefore is no longer simply whether an asset-backed security can be tokenised. It is whether the securitisation itself can become programmable from pool to payment – and, if so, which parts of the transaction remain irreducibly legal. This alert sets out the lifecycle, identifies the legal control point at each stage, and offers a realistic assessment of what can move on-chain now and what cannot.This alert describes legislative proposals and policy workstreams that are not yet law. The SECR review, the MISP amendments to the DLTPR and the proposed Settlement Finality Regulation are each subject to the ordinary legislative procedure and may change materially before adoption. Nothing in this alert should be read as a statement of the law as currently in force.Show Footnote