MSE Perspectives

The institutional embrace of real-world asset tokenization accelerated decisively in 2025. BlackRock’s BUIDL fund, launched on Ethereum in March 2024, approached $3 billion in assets under management by early 2026. JPMorgan’s Kinexys platform had processed over $2 trillion in cumulative blockchain transaction volume since inception — including tokenized collateral, intraday repo, and cross-border payment operations — averaging over $3 billion daily by late 2025. Franklin Templeton, Fidelity, Apollo, and Siemens all deployed institutional tokenization initiatives and live digital asset programmes during the year. Total on-chain tokenized real-world assets — excluding stablecoins — grew by approximately 266% over 2025, closing the year at roughly $18.6 billion according to RWA.xyz data.

The EU’s Markets in Crypto-Assets Regulation entered full application on 30 December 2024, providing a harmonised compliance framework for digital asset service providers across the bloc. McKinsey projects the tokenized asset market reaching between $2 and $4 trillion by 2030. The institutional narrative is reinforced by new entrants weekly.

The question worth examining is whether this momentum is being directed at the right problem.

What Is Actually Being Tokenized

The current RWA wave is overwhelmingly concentrated in financial instruments: US Treasuries, private credit, tokenized fund shares, and money-market products. Tokenized Treasury-linked products exceeded several billion dollars in on-chain value by late 2025. These are assets whose primary challenges are access, liquidity, and administrative friction — minimum investment thresholds, T+2 settlement delays, cross-border distribution barriers. Tokenization addresses all three: fractional ownership, near-instantaneous on-chain settlement, and 24/7 global distribution without correspondent intermediaries.

These are genuine improvements. But they are improvements to a system that, for large institutional participants, already functions with a high degree of legal certainty, regulatory clarity, and counterparty reliability. The US Treasury market is among the deepest and most liquid in the world. Private credit is illiquid by structure but legally well-defined. The problems being solved are real but incremental.

Physical commodity trade presents a structurally different set of problems — and a structurally different need for infrastructure.

The Problem That Is Not Being Solved

Global merchandise trade reached $33 trillion in 2024 according to UNCTAD data. A substantial share is physical commodities — metals, energy, agricultural products — moving through cross-border supply chains that depend on documentary credit instruments, correspondent banking networks, and bilateral contractual frameworks developed over decades.

The Asian Development Bank estimated the global trade finance gap at $2.5 trillion — the volume of trade that could not be financed due to bank risk appetite constraints, documentation requirements, and counterparty assessment limitations. That gap falls disproportionately on producers in emerging markets: precisely the segment most exposed to commodity price volatility, FX instability, and the settlement delays inherent in correspondent banking chains.

The structural problems in physical commodity settlement are distinct from those in financial markets. They include: counterparty risk between parties who may not share a legal jurisdiction or a common counterparty registry; settlement timing mismatches between physical delivery and payment that create working capital gaps; opacity of chain of custody that prevents financial institutions from extending credit without costly independent verification; and the growing requirement from regulators and end-buyers to provide auditable ESG and origin data embedded in the transaction record rather than appended after the fact.

None of these problems are solved by tokenizing a US Treasury. They require infrastructure built specifically for the transaction characteristics of physical trade: multi-party, multi-jurisdictional, with physical delivery as the terminal event rather than a secondary option.

What the Architecture Requires

Effective tokenized settlement infrastructure for physical commodity trade requires four properties that most current RWA platforms do not possess simultaneously.

First, fiat settlement integration without crypto intermediation. Industrial producers and buyers operate in fiat currencies under banking relationships carrying AML, KYC, and correspondent obligations. An infrastructure requiring cryptocurrency exposure at any point in the transaction chain will not achieve B2B adoption at scale. The settlement instrument must be anchored to verified fiat flows on both issuance and redemption.

Second, physical delivery as a legally enforceable outcome. The token must represent a contractually binding claim on a physical commodity — not a synthetic exposure or a secondary-market instrument. This requires offtake agreements with producers legally mirrored in the digital layer, and a clearing function that verifies delivery conditions as a condition of settlement finality.

Third, chain-of-custody certification as a native feature. ESG traceability is no longer a reporting add-on. Under the EU Corporate Sustainability Reporting Directive, the EU Taxonomy, CBAM, and supply chain due diligence frameworks now active across major jurisdictions, buyers require verified origin data that travels with the transaction record. Infrastructure that cannot generate audit-ready chain-of-custody certificates alongside settlement records will be displaced by infrastructure that can.

Fourth, regulatory compatibility across jurisdictions of origin and destination. Switzerland’s DLT Act, in force since August 2021, established a clear legal category for ledger-based securities and a licensing framework for DLT trading facilities — creating a structurally appropriate domicile for commodity settlement infrastructure. MiCA’s full application from December 2024 adds a harmonised EU compliance pathway. But most commodity flows originate outside these jurisdictions, requiring legal structures that function under the laws of Kazakhstan, Australia, the UAE, India, or Latin American producer countries — not merely under Swiss or EU frameworks.

The Market Position This Creates

The convergence of regulatory pressure — ESG disclosure requirements, carbon border adjustments, supply chain due diligence legislation — with the structural inadequacy of existing settlement infrastructure creates a defined market need. Industrial buyers need verifiable origin. Producers need access to working capital that does not depend on correspondent banking relationships across three jurisdictions. Financial institutions need instruments carrying the legal certainty and ESG metadata required under their own compliance frameworks.

The infrastructure that addresses this need does not look like a tokenized Treasury fund. It looks like a settlement layer bridging the physical supply chain — producer to logistics to buyer — with programmable payment logic and embedded compliance documentation, structured to function in fiat, legally enforceable in multiple jurisdictions, and designed from the outset for B2B counterparties rather than retail or DeFi participants.

This architecture is not yet widely deployed. It is, however, the direction in which regulatory pressure, ESG requirements, and the economics of commodity supply chains are converging.

The Carbon Border Adjustment Mechanism entered its definitive phase on 1 January 2026. For the three preceding years, CBAM operated as a reporting obligation — importers declared embedded carbon but paid nothing. That period is over. Imports of steel, cement, aluminium, fertilizers, and hydrogen from non-exempt countries now generate an accruing CBAM certificate liability, calculated against EU Emissions Trading System allowance prices. The structure of that liability — its timing, its scale, and how it varies by exporter — is widely misunderstood.

The Timeline: Liability Accrues in 2026, Settlement in 2027

CBAM certificate obligations for 2026 imports do not require cash payment in 2026. Under Regulation (EU) 2025/2083 — the CBAM Omnibus Regulation, which entered into force on 20 October 2025 — certificate sales open from February 2027, with the annual declaration and surrender deadline set at 30 September 2027.

The deferral restructures cash-flow timing, not the underlying obligation. Importers must account for CBAM certificate costs commercially and in financial provisions from the moment goods clear EU customs in 2026. The European Commission published the first official quarterly CBAM certificate price on 7 April 2026: €75.36 per tonne of CO₂ for Q1 2026 imports. From 2027, pricing moves to a weekly cycle based on EU ETS auction averages.

Phase-In Mechanism: Understanding the Cost Trajectory

CBAM is designed to mirror the gradual phase-out of free EU ETS allowances for covered sectors. In 2026, the applicable CBAM phase-in coefficient is 2.5%, rising annually — 5% in 2027, 10% in 2028 — until reaching full application at 100% in 2034.

This phase-in has a direct effect on the scale of certificate obligations in the near term. For 2026 imports, actual payable CBAM certificate requirements are materially lower than the theoretical full-phase exposure. The figures below represent illustrative full-exposure equivalents — the cost trajectory exporters face as the mechanism reaches full implementation — not the actual certificate obligation payable for 2026 imports.

Benchmarks, Default Values, and the Verification Imperative

The Commission finalised production-route emission reference values and country-specific default values in December 2025, legally binding from 1 January 2026. The distinction determines exposure.

For hot-rolled coil, production-route reference values are: 1.370 tCO₂/t for BF/BOF, 0.481 tCO₂/t for DRI/EAF, and 0.072 tCO₂/t for scrap-based EAF. These apply where the importer provides third-party verified actual emissions data. Where actual data is absent, country-specific default values apply — set conservatively at the high end of each country’s emission intensity distribution.

The gap is substantial. Country-specific default values for Indian HRC run to approximately 4.27 tCO₂/t; for Chinese steel slab to approximately 3.17 tCO₂/t. At the published Q1 2026 CBAM certificate price of €75.36/t, the theoretical full-phase exposure on Indian HRC calculated using default values reaches approximately €220 per tonne; for Indonesian material, market estimates place the figure above €500 per tonne. While 2026 payable obligations are a fraction of these figures due to the phase-in mechanism, the trajectory is fixed by regulation: it reaches these levels by 2034. Exporters without verified actual emissions documentation are building exposure into every long-term supply agreement signed today.

For cement and clinker, typical embedded emissions for modern kilns run to 0.83–0.89 tCO₂/t for clinker and approximately 0.76 tCO₂/t for Portland cement, reflecting irreducible process CO₂ from limestone calcination plus fuel combustion. None of the principal non-EU cement-supplying jurisdictions — Turkey, Morocco, Egypt, Algeria — currently operates a carbon pricing scheme recognised by the EU for CBAM deduction purposes. Turkey enacted its Climate Law in July 2025 establishing a legal basis for a domestic ETS, but that scheme is not currently recognised by the EU for CBAM offset credit.

What the Omnibus Simplification Actually Does

Regulation (EU) 2025/2083 replaced the former €150 per consignment value-based exemption with a mass-based threshold of 50 tonnes per year per importer. Importers whose total annual net CBAM-covered imports remain below 50 tonnes are fully exempt. Hydrogen and electricity are excluded from this threshold.

The Commission estimates this exempts approximately 90% of all EU importers by number while retaining 99% of embedded emissions within CBAM scope. A single commercial cargo of steel or clinker exceeds the threshold by orders of magnitude. The simplification is material for SMEs. It does not alter the obligations of any party operating at industrial scale.

Three Requirements That Cannot Be Deferred

For exporters shipping at commercial volumes, three operational requirements are structurally non-negotiable regardless of the phase-in schedule.

First, investment in verified actual emissions data at installation level, calculated per EU implementing regulation methodology. The gap between default and actual values is the largest single driver of the long-term CBAM cost trajectory. Third-party verification aligned to EU requirements is the qualifying condition — and the documentation infrastructure takes time to build.

Second, documented carbon cost adjustment in EU-bound offtake contracts. Long-term supply agreements without CBAM escalation mechanisms transfer the full phase-in cost increase to the exporter. As the phase-in coefficient rises from 2.5% in 2026 toward 100% in 2034, that transfer becomes commercially unsustainable.

Third, monitoring of the free allocation phase-out schedule. The effective CBAM cost per tonne increases each year through 2034 as free ETS allocations are eliminated. Supply agreements signed today at current certificate price levels will face a structurally different cost environment by 2030.

MSE’s Role

MSE GmbH supports exporters of steel, cement, and other CBAM-covered commodities with embedded carbon verification structuring, EU regulatory compliance strategy, and commercial offtake coordination with European counterparties — including documentation aligned to CBAM implementing regulations. Engagements are structured under Swiss-law advisory and commission agency frameworks.

The structural shift underway in rare metals and rare earth elements is frequently described as a supply problem. It is more precisely a market architecture problem — and the distinction matters for every board making capital allocation decisions in this space.

The China-Centric Baseline

The numbers are not in dispute. China controls approximately 70% of global rare earth mining and between 90 and 95% of separation and processing capacity. For heavy rare earths — dysprosium, terbium — Western dependence is projected to remain above 90% through 2030 even under optimistic Non-China development scenarios. Gallium sits at approximately 98% Chinese production share. Germanium and indium are structurally similar.

Export control measures introduced by China in 2023–2025 have already demonstrated the consequences: documented supply disruptions at OEM level, including verified production risks in the automotive sector in 2025. These were not price events. They were access events. The distinction is critical.

Demand is not waiting for supply to resolve itself. Rare earth elements are growing at 6–11% CAGR to 2030 depending on the vertical; gallium at 7–10%; lithium at 18–19% in volume terms despite recent price softness. The physical deficit in Non-China processing capacity is structural and will not be arbitraged away by spot market mechanisms.

Why a Western Cartel Will Not Emerge

The response from Washington, Brussels, Tokyo, and Seoul has been substantial in ambition. The EU Critical Raw Materials Act sets binding 2030 benchmarks: minimum 10% of consumption extracted domestically, 40% processed within the EU, 25% recycled, and no more than 65% dependence on any single third country for each strategic material.

Some observers have drawn analogies to OPEC — a coordinated Non-China supply bloc managing access and price. This will not happen. Antitrust frameworks on both sides of the Atlantic legally preclude quota coordination between companies or states. WTO obligations create additional barriers. Political heterogeneity across the Non-China producer base — Kazakhstan, Australia, the MENA region, India, Latin America, Southeast Asia — makes synchronized production policy practically impossible.

The Architecture That Is Actually Forming

What is forming instead is a regulated market — a precise term worth defining. Pricing remains market-based and index-referenced. But access and financing are increasingly shaped by a state-constructed framework: dependency KPIs, fast-track permitting for strategic projects, co-investment platforms such as the Minerals Security Partnership, long-term offtake structures with price corridors, strategic reserve programmes, and ESG and traceability standards as conditions of market entry.

The US Department of Defense — MP Materials agreement is the clearest precedent: $400 million equity, a ten-year magnet offtake, and a price floor for NdPr. Australia has committed $1.2 billion to a Critical Minerals Strategic Reserve launching in 2026. These are not administrative price controls. They are instruments that make Non-China projects financeable at a system level while preserving competitive pricing. The practical result: a Non-China project without a bankable offtake — formula pricing, defined corridors, credible counterparty — will increasingly struggle to attract project finance on competitive terms regardless of the quality of the underlying asset.

The Commercial Gap This Creates

The state framework defines the architecture. It does not execute it. Individual Non-China producers — particularly in Kazakhstan, Australia, and across MENA — are asset-rich and commercially fragmented. OEM and Tier-1 buyers need compliant, traceable, financeable supply. Banks and export credit agencies need bankable structures.

The gap between these three groups is the commercial opportunity. It requires an integrator who can aggregate fragmented Non-China supply into a financeable portfolio, structure offtakes that satisfy both OEM procurement standards and project finance requirements, deliver end-to-end traceability and QA/QC aligned to CRMA and G7 access standards, and manage logistics and working capital without taking naked price exposure onto the balance sheet.

Boards that understand this architecture will prioritise execution capability and bankability infrastructure over volume commitments. The scarcest input in Non-China critical minerals is not ore. It is a compliant, traceable, delivered supply that a bank will finance and an OEM will sign.

The European fuel ethanol market is undergoing a structural recalibration that will directly affect the commercial value of every cargo arriving at Rotterdam. The shift is regulatory in origin but its consequences are purely economic — and the window for producers to act without penalty is closing.

What Is Changing and When

From 1 July 2026, S&P Global Platts will raise the minimum weighted-average GHG saving threshold for T2 FOB Rotterdam ethanol price assessments from 64.3% to 75%. This is not a target or a trajectory — it is a hard floor for benchmark-grade classification.

Product that falls below the new threshold will no longer be assessable within the standard T2 grade. It will either be excluded from benchmark trading flows or face a structural pricing discount relative to compliant material.

Platts has already laid the groundwork for a bifurcated market. In October 2025, the agency launched a dedicated High GHG Savings assessment — ticker AGSSQ00 — with premium differentials to standard T2 grade assessed daily. That premium is now a permanent feature of the pricing landscape, not a temporary anomaly. The market is signalling clearly: carbon intensity is no longer a compliance checkbox. It is a pricing variable.

The Supply Context

EU domestic fuel ethanol production stands at approximately 5.9 billion litres annually, according to ePURE industry data. Under RED III, the European Union is required to achieve a 29% renewable energy share in transport by 2030 — a target that the current domestic production base cannot meet without substantial external supply.

The United States has become a structurally important supplier to this deficit. Following the expiry of EU anti-dumping measures in 2019, US producers gained full access to the European market and have steadily grown their share of import volumes. The commercial logic is straightforward: US grain-based ethanol, produced at scale from modern facilities with established sustainability documentation, is well-positioned to meet European compliance requirements — provided certification infrastructure is in place.

The July 2026 revision raises the bar. Producers who have built their European market positioning around the current 64.3% threshold will need to reassess feedstock sourcing, production parameters, and certification pathways. Those already operating above 75% GHG savings are positioned to capture the premium differential that the AGSSQ00 assessment reflects.

The Certification Timeline

ISCC EU certification is the primary compliance pathway for non-EU producers seeking access to the European renewable fuels market. The process encompasses documentation of feedstock origin, GHG calculation methodology, mass balance accounting, and third-party audit by an accredited certification body.

Producers initiating ISCC EU certification now may realistically target audit readiness in Q3–Q4 2026, depending on operational preparedness and existing documentation quality. This is a tight but executable timeline for well-organised facilities.

Each quarter of delay beyond that point increases two distinct exposures: first, potential exclusion from benchmark-grade trading flows where European counterparties require certified supply; second, widening pricing differentials as compliant supply commands an increasingly established premium over uncertified or sub-threshold material. The cost of delay is not hypothetical — it is being assessed and published daily by Platts.

MSE’s Role

Metal Supply Experts GmbH supports ethanol producers across the full European market-entry pathway — ISCC EU certification coordination, logistics structuring, EU regulatory compliance, and commercial offtake coordination with European fuel blenders, energy traders, and obligated parties — acting under Swiss-law commission agency structures.

For US producers seeking to establish or scale European supply relationships ahead of the July 2026 threshold revision, initial discussions can be directed to MSE GmbH through the contact form.