UK regulators seek feedback on tokenised wholesale markets

The Financial Conduct Authority and the Bank of England have set out a shared vision for tokenisation in UK wholesale markets. They are seeking industry feedback on regulation and market infrastructure.

The aim is to give financial firms a clearer direction on how tokenised assets and distributed ledger technology could develop in UK wholesale finance. Firms have asked for greater certainty as tokenisation expands into areas such as securities issuance, collateral and settlement.

Tokenisation is the digital representation of a real-world asset on a digital ledger in wholesale markets, such as shares, bonds, and units of currency. Policymakers say the model could reshape how assets are issued, traded and settled.

The joint approach addresses areas where market participants have sought clearer guidance, including prudential treatment, tokenised collateral and settlement instruments. The consultation also asks for views on the regulatory and infrastructure principles that should guide the development of tokenised wholesale markets in the UK.

Officials are seeking to support a broader shift from experimentation to practical deployment. Feedback from firms will help shape later policy work and a joint roadmap for digital wholesale markets.

This sits alongside a wider package of measures from the Bank of England and the Prudential Regulation Authority. The Bank has launched a consultation on extending RTGS and CHAPS settlement hours towards near round-the-clock operation through a phased model, including weekends and longer daily hours, subject to industry readiness.

Longer settlement windows would support cross-border payments and newer payment and settlement models as tokenisation develops. The Prudential Regulation Authority has also issued updated guidance to bank chief executives on the prudential treatment of tokenised asset exposures, and on developments involving deposits, e-money and stablecoins.

The guidance reflects recent market changes and reiterates supervisory expectations on risk management and compliance. The FCA will also consider whether its approach to client asset rules should change in response to industry feedback.

Industry shift

The latest position reflects a broader regulatory effort to set clearer boundaries for the use of distributed ledger technology in mainstream financial markets. Rather than focusing only on crypto assets, the work centres on established wholesale market functions and on how existing financial instruments could be represented and processed in digital form.

The Bank and the FCA are already working with 16 firms through the Digital Securities Sandbox on the live issuance and settlement of tokenised assets. The sandbox has become a test bed for assessing how market infrastructure, settlement processes and regulation might operate if tokenised instruments move into wider use.

The Bank is also developing arrangements that would allow tokenised equivalents of assets already eligible as collateral to be used at central counterparties and in its own operations. That work is linked to broader official plans for a pilot issuance of a digital gilt by HM Treasury.

"Tokenisation has the potential to transform wholesale markets - reshaping how assets are issued, traded and settled. We want to support firms in adopting this technology to lower costs, reduce risk and unlock new services, and our partnership with the Bank of England will ensure a common approach across all parts of wholesale markets. Today we are setting out the principles of a shared long-term vision to give industry the clarity it needs to engage, invest and innovate with confidence. UK markets have always embraced new technology, and that will be central to ensuring the UK remains at the forefront of global wholesale markets," Simon Walls, Executive Director of Markets at the FCA, said.

Policy direction

The Bank has framed the next phase as implementation rather than pilot activity alone. Its work with the FCA and the government has focused on how tokenisation can be introduced into regulated markets without undermining financial stability.

"The Bank and FCA have done a huge amount to enable the responsible adoption of tokenisation in retail and wholesale finance in the UK, working with the government and the industry. The task now is for public and private sectors together to build on these strong foundations, moving from pilots to production to support financial stability and sustainable growth," Sarah Breeden, Deputy Governor for Financial Stability at the Bank of England, said.

For UK authorities, the central question is no longer whether tokenisation should be explored, but how existing market rules, payment systems and supervisory standards should adapt if digital representations of conventional assets become more common in wholesale finance. The consultation asks firms where the current framework supports that transition and where it may constrain the safe use of the technology.

The outcome is likely to shape the next stage of policy for digital wholesale markets, including regulation, settlement design and the treatment of tokenised assets within the wider financial system.