Lately there is an increasingly fashionable view that Europe has lost its edge in terms of innovation and sustainable economic progress. One viral meme depicts this perfectly: a side-by-side comparison of a SpaceX booster rocket landing gracefully back on Earth versus a bureaucratic victory in Europe, the successful reattachment of a plastic bottle cap. What is this trying to portray? While we see that the U.S. pushes the boundaries of latest technological advancements, the EU is obsessing over minor regulatory barriers.
The European Union’s strategies to foster growth and prosperity has been widely questioned. For EU, the regulatory environment is often seen as more of a hindrance than a facilitator of advancement, this is backed up by major voices including former ECB President Mario Draghi himself, who has sounded the alarm.
His assessment is blunt in the Draghi’s 2024 Competitiveness Report, which clearly paints a grim picture where Europe is portrayed in a severe economic slowdown situation, and its several major challenges are being effectively addressed. For example, in a recent Financial Times opinion piece, he is emphasizing that the EU’s structural issues are holding back growth, especially when it comes to its single market for services.
Theoretically, a single market should enable easy trade across borders, but practically this is quite different. Like Mr. Draghi stated that the EU single market for services is a single market in name only. Incredible barriers to trading services across the EU persist: like, since the mid-1990s, trade costs in services are estimated to have dropped by 11% within the EU but by 16% for Non-EU imports. This helps explain why trade in services inside and outside the EU is about the same today in terms of GDP – unthinkable in a fully integrated large economy.
The barriers to exporting services within member states are not just inconvenient—they are often too great to overcome. Regulatory fragmentation, inconsistent licensing requirements, and national protectionist measures create a tangled web of obstacles. The result? A paradoxical situation where it’s often easier to trade financial services with a company outside the EU than with one inside it.
This is more than just an economic inefficiency—it’s a fundamental weakness in Europe’s growth model. The EU cannot provide businesses with a truly unified market, and if this continues, we are going to lag behind competitors who operate in more flexible environments.
At Nyala, we’ve seen these barriers firsthand. Our Co-CEO, Daniel Wernicke, recently highlighted the challenges of cross-border financial services in the EU and voiced his support for the 28th Regime—a regulatory framework designed to bypass some of these inefficiencies and eliminate 27 hurdles. Moreover, we have both supported the EU.inc initiative and encouraged other founders to do so as well.
Given the critical nature of these regulatory barriers, we require quick practical solutions. The 28th Regime, proposed by the European Commission, offers one such workaround, rather than relying on national regulatory frameworks that vary wildly, the 28th Regime would provide businesses with an optional and pan-European regulatory structure. This would allow companies to operate across the EU under a single set of rules instead of tons.
If we think practically, many of these internal barriers will continue for years. That’s why we at NYALA see tokenization as a crucial solution of this challenge. By leveraging blockchain technology, we are helping all sorts of businesses accessing funding more efficiently, sidestepping some of the bureaucratic hold up that is stopping traditional financial markets to grow.
Tokenization offers financial fluidity, and by digitizing assets, companies can raise capital in a way that goes beyond national regulatory hurdles, making investment opportunities more accessible across the entire EU. In a fragmented market, tokenization acts like a crucial bridge between capital and innovation.
Europe’s economic challenges exist, but so do the opportunities with utmost potential. The funding gap that stops growth and innovation across the continent can be addressed with the right tools and tokenization is one of those tools.
For businesses and SMEs looking to scale up and investors looking to deploy capital efficiently, right now is the best time to embrace digital assets. We have everything: The technology, the need, and the potential impact which is going to be enormous.
The EU may struggle to fix its systemic inefficiencies in near future, but digital innovation is finding a way around them. We at NYALA are therefore committed to making this happen—one issuance at a time!
