The Financial Conduct Authority (FCA) and the Bank of England have published a shared vision for the adoption of tokenisation and distributed ledger technology (DLT) in UK wholesale markets, alongside a call for industry views on regulation and infrastructure. The move follows direct feedback from firms seeking greater regulatory certainty as the technology develops.
Tokenisation involves creating a digital representation of a real-world asset, such as a share, bond, or unit of currency, on a digital ledger. The regulators state that it has the potential to simplify wholesale markets by making the issuance of securities and asset management faster and more efficient, while also supporting market resilience and lowering costs.
Regulatory clarity and a joint roadmap
The two regulators have set out their approach in areas where firms have requested greater clarity, including prudential treatment, tokenised collateral, and settlement instruments. They have also opened a discussion on the key principles for regulation and infrastructure that could facilitate the broader development of tokenisation in wholesale markets.
Simon Walls, Executive Director of Markets at the FCA, stated that the two institutions were setting out the principles of a shared long-term vision to give industry the clarity it needs to engage, invest, and adopt the technology with confidence. He added that the partnership with the Bank of England was intended to ensure a consistent approach across all parts of wholesale markets.
Sarah Breeden, Deputy Governor for Financial Stability at the Bank of England, noted that both institutions had worked with government and industry to enable the responsible adoption of tokenisation across retail and wholesale finance in the UK. She described the current moment as a transition from pilots to production, to support financial stability and sustainable growth.
Industry feedback gathered through this process will inform the next steps of a joint roadmap for digital wholesale markets.
Supporting infrastructure and prudential guidance
In a parallel development, the Bank of England has published a consultation on extending RTGS and CHAPS settlement hours, setting out a staged approach towards near 24/7 settlement. This includes weekend and extended daily operating hours, subject to consultation and industry readiness, to support cross-border payments and new payment and settlement models as tokenisation scales.
The Prudential Regulation Authority (PRA) has also published guidance letters to chief executives updating its position on the prudential treatment of tokenised asset exposures, as well as on innovations in deposits, e-money, and stablecoins. The letters reflect recent market developments and reaffirm expectations around risk management and compliance.
On its own commitments, the FCA stated it would continue work to support tokenisation in the UK, including reviewing how its approach to client asset rules may evolve in light of industry feedback. The regulator recently published a policy statement on progressing fund tokenisation.
