UK regulators seek input on tokenisation of wholesale financial markets

The UK financial regulators have committed to an intensive period of collaboration with industry to deliver the benefits promised by tokenisation. In a new call for input, the Bank of England and Financial Conduct Authority set out a shared vision for how distributed ledger technology (DLT) can be adopted by UK wholesale markets and their role in working with industry to fulfil its potential. They invite comments by 3 July 2026.

The promise of tokenisation

The Bank and FCA suggest that tokenisation could be one of the most consequential changes to wholesale financial markets. By representing financial assets and their ownership using DLT, the industry can benefit from faster settlement, 24/7 trading, improved liquidity, efficiency savings and more automation via smart contracts.

In their call for input, the regulators set out the principles that they plan to follow for future policy change. For example, they insist that an identifiable person should be accountable for regulated financial services, that all primary and secondary market participants must be subject to know-your-customer (KYC) checks, and that there should be fair, orderly and resilient trading conditions for tokenised securities.

On the one hand, the call for input seeks to support the equivalent treatment of tokenised assets with their traditional counterparts in various contexts, including for prudential and collateral purposes. On the other hand, the regulators want to ensure that new technologies and decentralised market structures do not undermine existing regulatory objectives. According to the call for input, tokenised securities should be used because of their underlying benefits rather than regulatory arbitrage.

Policy announcements

The call for input indicates where the regulators' policy approach has already evolved. For example:

• Prudential treatment of tokenised assets: In a letter published alongside the call for input, the Prudential Regulation Authority has confirmed that, in general, tokenised assets should receive the same prudential treatment as their non-tokenised equivalents where legal rights are identical and underlying risks are comparable. For example, digital issuances within the Digital Securities Sandbox can be treated as equivalent to traditional issuances for these purposes.

• SIC custody: The FCA says it has dropped its proposal to apply CASS 17 (draft rules for safeguarding qualifying client cryptoassets) to specified investment cryptoassets. Instead, the CASS 6 custody rules will continue to apply to these tokenised structures. The FCA seeks feedback on whether a different safeguarding framework for SIC custody is needed in the longer term.

Charting a course

The regulators also use the call for input to put forward an initial roadmap of initiatives to support further engagement on tokenised structures. They plan to finalise the roadmap before the end of the year. Areas for future policy development include:

• Central bank money settlement: The Bank plans to deliver a synchronisation service enabling settlement of new digital asset ledgers in sterling central bank money via its real-time gross settlement service (RTGS). The Bank plans to share more information in early 2027 and is targeting 2028 for launch. The Bank will also assess the benefits of tokenised central bank money, including a potential wholesale central bank digital currency, in 2027.

• Tokenised collateral: The Bank will open a discussion paper later this year on the potential for tokenised collateral to be accepted by central counterparties. The Bank will also consider the eligibility of tokenised assets as collateral in its own Sterling Monetary Framework operations, starting with HM Treasury’s digital gilt instrument known as DIGIT.

• Digital Securities Sandbox: The regulators will consider, with HM Treasury, whether to extend or modify the sandbox, or make changes to the UK’s Central Securities Depositories Regulation.

Next steps

The call for input marks the starting point of a new phase of engagement between the regulators and the industry on tokenisation under the Government’s Wholesale Financial Markets Digital Strategy. This will include the Bank and FCA:

• Engaging with industry via workshops over the next few months,

• Publishing a response to the call for input this summer,

• Finalising a roadmap on digitalisation of wholesale markets by the end of 2026, and

• Consulting on specific rule changes in 2027.

The call for input closes on 3 July 2026.