UK-based ClearToken CSD has received Bank of England approval to operate a Digital Securities Depository (DSD) in the Digital Securities Sandbox (DSS).
The approval, known as 'Gate 2’, allows the entity to issue and settle tokenised versions of existing securities under the Bank's supervision, within set limits.
According to the company, ClearToken CSD is the second firm to pass Gate 2 and the first non-bank to do so. ClearToken also describes it as the first DSD approved to settle tokenised equities and corporate bonds alongside sovereign debt, and as the first cloud-native securities settlement system in the UK.
Round-the-clock settlement and intraday repo
The infrastructure allows tokenised securities to be settled, mobilised as collateral, and financed at any time of day. ClearToken says this makes it possible to settle repo intraday on a 24/7 basis. Institutions would no longer rely on batch processing and end-of-day cut-offs. Because settlement is available throughout the day, participants can borrow against collateral for hours rather than days, which the company says lowers financing costs.
To avoid splitting liquidity between digital and conventional markets, ClearToken CSD uses the same ISINs for both forms of a security. This keeps them fungible and preserves holders' rights.
Phased expansion of eligible assets
At rollout, the settlement service covers FTSE 350 equities, GBP government debt, and GBP and non-GBP corporate bonds. All of these can be used as collateral in securities financing transactions. Subject to further approval from the Bank of England, ClearToken plans to add asset classes in phases, including global public equities, private funds, physical commodities such as gold, and digital assets.
Under this model, an institution could hold an asset it already owns, such as a security, a commodity, or a money market fund unit, in a single legal form carrying an ISIN. That asset would settle 24/7 and book directly into the collateral and treasury systems the institution already uses.
Ben Santos-Stephens, CEO of ClearToken Group, said the main obstacle to institutional adoption of digital securities has been whether the surrounding infrastructure is regulated and legally recognised, more than the technology itself.
A three-entity post-trade structure
ClearToken is combining three regulated businesses into a single post-trade offering for tokenised assets. The service will handle securities settlement, cash transfers, and the clearing of financing transactions and derivatives.
The company settles fiat currency, stablecoins, and cryptoassets. It is authorised by the FCA as an Authorised Payment Institution and is registered as a cryptoasset firm. ClearToken CSD Limited will act as the DSD now that it has cleared Gate 2. ClearToken CCP Limited has filed an application with the Bank of England to become an authorised central counterparty.
Cash settlement is already authorised, and securities settlement now has sandbox approval. With both in place, ClearToken says an asset's full lifecycle, from issuance through settlement and financing to payment, can take place inside a regulated environment. The group is also running working groups with institutional firms, investment banks, and trading venues. These groups will shape the operating processes, collateral procedures and settlement rules needed for wider uptake.
