Competition Law and Tokenized Financial Market Concentration

1. Introduction

Tokenized financial markets use blockchain or distributed-ledger technology to represent financial assets digitally, including shares, bonds, money-market instruments, fund interests, deposits, and other securities. Tokenization can alter the structure of financial markets by separating or integrating functions that were traditionally performed by different institutions—such as issuance, custody, trading, clearing, settlement, asset servicing and liquidity provision.

From a competition-law perspective, the central concern is not simply whether a blockchain market is decentralized. A tokenized market may actually become more concentrated if one undertaking controls the token standard, trading venue, wallet infrastructure, settlement network, liquidity pool, custody service, oracle, or access to critical data.

Current regulatory discussions similarly identify concerns where vertically integrated tokenized-equity venues control onboarding, trading and blockchain settlement rails, potentially creating liquidity pools that are not interoperable with conventional markets.

The principal competition-law questions are therefore:

1. Who controls the tokenized financial market?
2. Can access to the blockchain or settlement infrastructure be denied?
3. Can a dominant platform favour its own tokenized products?
4. Can trading, custody, clearing and settlement be vertically integrated?
5. Can interoperability restrictions exclude competing venues?
6. Can concentration of liquidity create market power?
7. Can token issuers or platforms coordinate prices through common algorithms?
8. When does a technology provider become an essential facility?

2. Meaning of Tokenized Financial Market Concentration

Tokenized financial market concentration occurs when a small number of undertakings obtain substantial control over one or more economically important layers of a tokenized financial ecosystem.

A tokenized securities ecosystem can generally be divided into:

Issuer → Tokenization protocol → Primary market → Trading venue → Wallet/custodian → Clearing → Settlement → Secondary market

A single company could potentially operate several of these layers.

For example:

Company A issues tokenized bonds, operates the blockchain on which they exist, controls the principal exchange on which they trade, provides custody, operates the settlement mechanism and supplies the market data.

Such integration may create significant competition concerns even if there are technically many token holders.

3. Relevant Competition-Law Framework

A. Market Definition

Competition authorities would first determine the relevant market.

Possible relevant markets include:

• tokenized securities trading;
• tokenized bond trading;
• tokenized equity trading;
• tokenization-as-a-service;
• blockchain settlement;
• digital custody;
• tokenized asset exchanges;
• institutional tokenization infrastructure;
• blockchain-based clearing;
• tokenized fund platforms;
• tokenized collateral services.

The authority may also ask whether tokenized and traditional financial markets belong to the same relevant market.

For example:

Are tokenized corporate bonds substitutes for conventional corporate bonds?

The answer could depend upon liquidity, investor eligibility, settlement speed, regulatory treatment, transaction costs and interoperability.

4. Sources of Market Power

4.1 Control over Token Standards

A platform controlling the technical standard for a widely used token may gain significant influence over:

• compatibility;
• transaction processing;
• wallets;
• settlement;
• smart contracts;
• data access;
• upgrades.

If competing platforms cannot interact with the dominant token standard, the technical standard can become a competitive bottleneck.

4.2 Network Effects

Tokenized financial markets can exhibit strong network effects.

More investors attract more issuers.

More issuers attract more investors.

More liquidity attracts market makers.

More market makers attract additional investors.

This produces:

Liquidity → Users → Issuers → Liquidity

Once a platform becomes sufficiently large, competitors may find it difficult to attract liquidity.

This is particularly important because financial markets are often highly dependent upon depth and liquidity, rather than merely the number of registered users.

5. Vertical Integration

A tokenized financial platform may simultaneously provide:

• token issuance;
• exchange services;
• custody;
• wallet services;
• settlement;
• clearing;
• market data;
• liquidity provision.

Vertical integration can produce efficiencies, but it can also allow a dominant undertaking to discriminate against competing platforms.

Potential theories of harm include:

A. Input foreclosure

The dominant platform denies competitors access to:

• settlement infrastructure;
• token standards;
• liquidity;
• APIs;
• custody;
• market data.

B. Customer foreclosure

The platform requires issuers or investors to use its own downstream services.

C. Margin squeeze

A vertically integrated platform charges competitors high wholesale infrastructure fees while maintaining low prices for its own downstream service.

D. Self-preferencing

The platform gives its own tokenized securities or affiliated trading venues preferential treatment.

6. Essential-Facility Issues

A particularly important issue concerns whether tokenized financial infrastructure can constitute an essential facility.

The classical question is:

Can a dominant infrastructure operator refuse access to a facility that competitors cannot reasonably duplicate?

This could arise where one undertaking controls:

• a unique tokenization infrastructure;
• a dominant settlement blockchain;
• a critical securities registry;
• a dominant institutional wallet;
• an indispensable liquidity pool;
• a proprietary interoperability bridge.

The doctrine must, however, be applied cautiously because competition law does not ordinarily require successful firms to provide every competitor with access to their infrastructure.

7. Case Law

Because tokenized financial markets are relatively new, there is limited reported competition case law specifically concerning concentration in tokenized securities markets. Consequently, the following cases are particularly useful because they establish competition principles that can be applied to tokenized financial infrastructure.

Case 1: United Brands v Commission

Case 27/76, United Brands Company v Commission

Principle

The Court of Justice established important principles concerning:

• market definition;
• dominance;
• barriers to entry;
• economic power;
• exclusionary conduct.

A dominant position is essentially a position of economic strength allowing an undertaking to behave to an appreciable extent independently of competitors, customers and ultimately consumers.

Application to tokenized markets

Suppose a blockchain-based securities platform controls most institutional tokenized-bond trading.

Its market power would not necessarily be measured solely by transaction volume.

Authorities could consider:

• liquidity;
• switching costs;
• network effects;
• technical barriers;
• access to institutional investors;
• access to tokenized securities;
• interoperability;
• data advantages.

Thus, a tokenized platform with a relatively small number of users could nevertheless possess substantial market power if those users represent the overwhelming majority of institutional liquidity.

8. Case 2: Bronner v Mediaprint

Case C-7/97, Oscar Bronner GmbH & Co. KG v Mediaprint

Principle

The case established an important framework for refusal-to-deal and essential-facility analysis.

The Court imposed a demanding threshold before requiring a dominant undertaking to provide competitors with access to infrastructure.

Application

Imagine that Platform A operates the only economically viable settlement infrastructure for tokenized government bonds.

Platform B requests access.

A competition authority would need to consider:

1. Is the infrastructure genuinely indispensable?
2. Can Platform B reproduce it economically?
3. Is there an actual risk of eliminating competition?
4. Is access objectively possible?
5. Can access be provided without undermining legitimate operational requirements?

The case therefore prevents competition law from automatically converting every privately operated blockchain infrastructure into a mandatory-access facility.

9. Case 3: IMS Health v NDC Health

Cases C-418/01, IMS Health GmbH & Co. OHG v NDC Health GmbH & Co. KG

Principle

The Court considered refusal to license an intellectual-property-protected system and developed important principles concerning exceptional compulsory access.

The case is especially relevant to tokenization because financial platforms may control:

• proprietary token standards;
• smart-contract architecture;
• proprietary APIs;
• data structures;
• interoperability technologies.

Application

Suppose a dominant tokenization provider develops a proprietary standard used by virtually all institutional investors.

It refuses interoperability with rival exchanges.

If the relevant legal requirements for exceptional compulsory access are satisfied, competition law may become relevant.

The important point is that technical ownership cannot automatically be used as a mechanism for eliminating downstream competition.

10. Case 4: Microsoft v Commission

Case T-201/04, Microsoft Corp. v Commission

Principle

The Microsoft litigation is highly relevant to digital financial infrastructure because it concerns:

• interoperability;
• leveraging;
• tying;
• exclusion of competitors;
• control over technological interfaces.

The EU competition authorities were concerned, among other matters, with Microsoft's refusal to provide interoperability information necessary for competing products.

Application to tokenized markets

Consider a dominant tokenized securities platform that controls:

• the token;
• wallet;
• API;
• settlement interface.

It could theoretically design its architecture so that rival exchanges cannot connect efficiently.

Possible competitive concerns include:

Technical incompatibility → higher switching costs → reduced competition → reinforcement of dominance

Interoperability therefore becomes one of the most important competition issues in tokenized financial markets.

11. Case 5: MasterCard v Commission

Case C-382/12 P, MasterCard Inc. and Others v Commission

Principle

The litigation concerning MasterCard's multilateral interchange fees demonstrates how a financial-network operator can become subject to competition law where its rules affect competition between participants in a payment ecosystem.

The Court considered the competitive effects of the MasterCard payment system and its interchange arrangements.

The broader significance is that a network can exercise economic influence through its rules, even when the network is not itself performing every underlying transaction.

Application to tokenized finance

Tokenized financial platforms can similarly establish rules governing:

• transaction fees;
• listing;
• access;
• settlement;
• liquidity;
• wallet compatibility;
• smart-contract interaction;
• validator participation.

If a dominant network imposes rules that disadvantage competing financial intermediaries, Article 101 or Article 102 TFEU-type analysis may become relevant.

The Budapest Bank litigation also demonstrates the continuing importance of competition analysis of payment-system arrangements and interchange mechanisms.

12. Case 6: Ohio v American Express

Ohio et al. v American Express Co., 585 U.S. 529 (2018)

Principle

The U.S. Supreme Court considered competition in a two-sided transaction platform.

The case is highly relevant to tokenized financial markets because tokenized exchanges are often two-sided or multi-sided platforms connecting:

• issuers;
• investors;
• brokers;
• market makers;
• custodians;
• liquidity providers.

The Court emphasized the need to consider both sides of the platform when assessing competitive effects in the relevant circumstances.

Application

For a tokenized securities exchange:

Investors ← Tokenized Exchange → Issuers

A restriction that benefits issuers but harms investors—or vice versa—cannot necessarily be understood by looking at only one side.

This is particularly important when determining whether platform rules genuinely produce efficiencies or instead reinforce platform power.

13. Case 7: London Stock Exchange / Deutsche Börse

The proposed combination between Deutsche Börse and NYSE Euronext generated extensive European competition scrutiny concerning concentration in financial-market infrastructure.

The broader lesson for tokenization is that financial infrastructure markets can contain important competitive bottlenecks.

A merger between major tokenized-asset infrastructures could potentially eliminate competition at several layers simultaneously:

Trading + clearing + settlement + market data + custody

Consequently, competition authorities may need to examine not merely the number of exchanges but the architecture of the financial ecosystem.

14. Case 8: Sainsbury's v Mastercard

The UK litigation arising from Mastercard's interchange-fee arrangements is another important financial-network competition example.

The courts examined the competitive consequences of Mastercard's interchange-fee system and its effects on merchant acquiring competition. The litigation demonstrates that financial-network rules can have substantial downstream competitive effects.

Relevance to tokenized markets

A tokenized securities network could similarly impose:

• transaction fees;
• settlement fees;
• listing fees;
• access charges;
• liquidity requirements.

If the platform possesses market power, discriminatory fee structures could potentially constitute exclusionary conduct.

15. Tokenized Markets and Self-Preferencing

One of the most significant future competition issues is self-preferencing.

Assume:

Platform A operates the dominant tokenized securities exchange.

Platform A also issues tokenized investment products.

It could potentially:

• place its products higher in search results;
• provide them with better liquidity;
• give them faster settlement;
• reduce transaction fees;
• restrict competing products;
• give affiliated market makers preferential access.

The competition question would be whether these practices exclude equally efficient competitors or otherwise distort competition.

16. Tokenized Market Data

Data is another potential source of concentration.

A dominant tokenized exchange may possess real-time information concerning:

• investor identities;
• transaction volumes;
• token ownership;
• trading patterns;
• liquidity;
• order books;
• settlement activity.

A competitor may require this data to compete effectively.

Potential abuses include:

• discriminatory API access;
• excessive data charges;
• delayed access for competitors;
• preferential access for affiliated entities;
• bundling market data with trading services.

This creates an intersection between competition law, financial regulation, privacy law and data-governance rules.

17. Liquidity Concentration

Liquidity is particularly important in tokenized financial markets.

Suppose three platforms exist:

Platform A may therefore possess considerably more competitive power than its asset-listing share suggests.

This illustrates why authorities should not rely solely on:

• number of tokens listed;
• number of registered users;
• transaction count.

They should also examine:

• trading volume;
• order-book depth;
• bid-ask spreads;
• institutional participation;
• market-maker concentration;
• switching costs.

18. Stablecoins and Tokenized Financial Concentration

Stablecoins can become particularly important infrastructure.

A widely used stablecoin can function as:

Settlement Asset + Liquidity Instrument + Collateral + Payment Mechanism

If one issuer dominates, competition concerns could arise regarding:

• reserve management;
• redemption;
• access;
• interoperability;
• wallet compatibility;
• exchange listing;
• transaction validation.

Current European discussions concerning stablecoin structures illustrate how token design can have consequences extending beyond ordinary crypto trading into banking and financial infrastructure.

19. Interoperability as a Competition Remedy

Competition authorities could potentially address concentration through interoperability requirements.

Possible remedies include:

1. API access

Dominant platforms could be required to provide non-discriminatory API access.

2. Cross-chain interoperability

Tokenized assets could be made transferable across compatible networks.

3. Data portability

Investors could transfer relevant financial information between platforms.

4. Open technical standards

Dominant platforms could be prevented from using proprietary standards solely to exclude competitors.

5. Functional separation

Trading, custody and settlement could potentially be separated where vertical integration creates substantial foreclosure risks.

20. Merger Control

Tokenized financial markets may create novel merger scenarios.

For example:

Dominant tokenization platform + major securities exchange

or:

Tokenized exchange + custody provider

or:

Blockchain settlement system + institutional market-data provider

or:

Stablecoin issuer + tokenized securities marketplace

Traditional turnover thresholds may fail to capture strategically important acquisitions by digital platforms.

Therefore, competition authorities may examine:

• transaction value;
• assets under tokenization;
• user base;
• liquidity;
• strategic data;
• network effects;
• future competitive significance.

21. Algorithmic Coordination

Tokenized markets can also facilitate algorithmic coordination.

Smart contracts and automated market-making systems can make prices and transactions highly transparent.

Potential risks include:

• algorithmic price coordination;
• common pricing algorithms;
• automated information exchange;
• synchronized liquidity strategies;
• coordinated trading fees.

The fact that coordination is implemented through code does not necessarily immunize it from competition law.

The central question remains whether independent undertakings have engaged in conduct that restricts competition.

22. Decentralized Autonomous Organizations

DAOs create a particularly difficult competition-law problem.

A DAO may involve:

• token holders;
• developers;
• validators;
• liquidity providers;
• governance participants.

The question becomes:

Who is the undertaking for competition-law purposes?

If token holders collectively determine:

• fees;
• listing rules;
• liquidity requirements;
• access conditions,

competition authorities may have to determine whether the governance structure represents independent market participants or a coordinated economic entity.

23. Competition Risks Across the Tokenization Chain

24. Possible Theories of Competition Law Infringement

Article 101-type concerns

• agreements among token issuers;
• coordinated trading fees;
• allocation of customers;
• exchange governance agreements;
• market-sharing arrangements.

Article 102-type concerns

• refusal to provide infrastructure access;
• discriminatory access;
• tying;
• bundling;
• self-preferencing;
• excessive or discriminatory fees;
• margin squeeze;
• exclusionary interoperability restrictions.

Merger-control concerns

• acquisition of competing token platforms;
• acquisition of liquidity providers;
• acquisition of custody infrastructure;
• acquisition of tokenization technology;
• acquisition of market-data providers.

25. Regulatory Challenges

A. Decentralized governance

Traditional competition law generally identifies undertakings and decision-makers.

DAOs can make this difficult.

B. Cross-border markets

Tokenized assets may operate globally, requiring coordination among:

• EU authorities;
• U.S. agencies;
• UK authorities;
• Asian regulators;
• securities regulators;
• competition authorities.

C. Technical complexity

Competition authorities may need expertise concerning:

• smart contracts;
• consensus mechanisms;
• bridges;
• AMMs;
• validators;
• zero-knowledge systems;
• token standards.

D. Rapid market evolution

Market power can develop extremely quickly because network effects can accelerate adoption.

26. Relationship Between Competition Law and Securities Regulation

Competition law and securities regulation serve different purposes.

Securities regulation asks:

Is the financial product and market infrastructure lawfully regulated?

Competition law asks:

Is the structure or conduct of market participants restricting competition?

A platform can therefore face competition concerns even where its securities-law compliance is otherwise satisfactory.

The reverse is also possible.

For example, current U.S. litigation concerning Coinbase has principally involved securities-law questions concerning exchange, broker, dealer and clearing functions rather than establishing a competition-law violation. A 2024 SDNY decision allowed significant SEC claims concerning Coinbase's alleged exchange/broker/clearing activities to proceed.

This distinction is important when analysing tokenized financial markets.

27. Economic Efficiencies

Not every concentration is anticompetitive.

Tokenization can generate legitimate efficiencies through:

• lower settlement costs;
• faster settlement;
• reduced reconciliation;
• reduced counterparty risk;
• automated compliance;
• 24/7 trading;
• improved transparency;
• reduced intermediaries;
• programmable corporate actions.

Vertical integration may therefore be economically justified in some circumstances.

Competition analysis should distinguish:

efficiency-producing integration

from

exclusionary integration designed to prevent rivals from competing.

28. Competition-Law Remedies

Where an infringement is established, possible remedies may include:

Structural remedies

• divestiture;
• separation of businesses;
• disposal of competing assets.

Behavioural remedies

• non-discriminatory access;
• interoperability;
• transparent listing rules;
• fair API access;
• prohibition of self-preferencing;
• data portability;
• reasonable access fees.

Merger remedies

• divestiture commitments;
• access commitments;
• firewall arrangements;
• licensing commitments;
• interoperability commitments.

29. Practical Hypothetical

Assume TokenX becomes the dominant institutional tokenized-bond platform.

It controls:

1. token issuance;
2. trading;
3. custody;
4. settlement;
5. market data;
6. liquidity provision.

TokenX then announces:

Competitors may list tokenized bonds only if settlement occurs through TokenX's blockchain.

It simultaneously charges independent exchanges high settlement fees while giving its own exchange preferential rates.

Competition issues

Market 1: Tokenization infrastructure

Market 2: Tokenized-bond trading

Market 3: Settlement

Market 4: Market data

Potential theories include:

• refusal to deal;
• discriminatory access;
• tying;
• margin squeeze;
• self-preferencing;
• foreclosure;
• leveraging dominance.

The Bronner, IMS Health, Microsoft, MasterCard and American Express principles would provide useful analytical frameworks.

30. Key Case-Law Summary

31. Conclusion

Tokenized financial market concentration represents a new technological form of familiar competition-law problems. Blockchain does not eliminate market power; instead, market power can migrate from traditional intermediaries to new infrastructure operators controlling tokens, liquidity, settlement, custody, data, algorithms and interoperability.

The most significant future competition-law questions are likely to concern:

1. dominant tokenization platforms;
2. blockchain settlement bottlenecks;
3. liquidity concentration;
4. interoperability and access;
5. vertical integration of trading and settlement;
6. stablecoin concentration;
7. market-data control;
8. algorithmic coordination;
9. DAO governance;
10. mergers between tokenization, exchange, custody and settlement businesses.

The existing competition-law doctrines remain broadly capable of addressing these problems. The major challenge is their application to technologically decentralized but economically concentrated markets. Contemporary policy discussions already recognize that vertically integrated tokenized-equity infrastructure can affect competition where trading and settlement rails become inaccessible to competing markets.

Thus, the central legal question is not simply whether a tokenized market is decentralized. It is:

Who controls the economically indispensable infrastructure, and can that control be used to prevent rival undertakings from competing?