BoE and FCA seek clarity on tokenized UK wholesale markets

The Bank of England and the Financial Conduct Authority on Monday launched a joint Call for Input setting out a shared vision for tokenized activity in UK wholesale markets. The request asks market participants to identify where rules and market infrastructure need clarification so tokenized assets can be issued, traded and settled with confidence.

The regulators said they will concentrate on three areas: the prudential treatment of tokenized exposures, the treatment of tokenized collateral, and which settlement instruments can be used in wholesale transactions. The paper follows testing and sandbox work and is intended to guide next steps for policy and market infrastructure.

The Bank of England confirmed plans for a live ledger synchronization service targeted for 2028 to align ledger-based activity with central bank systems. The Bank also plans to consult on extending RTGS and CHAPS settlement hours to near round-the-clock operation and to support HM Treasury’s pilot issuance of a digital gilt, known as DIGIT.

Regulators noted that 16 firms are taking part in a Digital Securities Sandbox focused on live issuance and settlement of tokenized assets. The Prudential Regulation Authority has issued Dear CEO letters updating guidance on prudential treatment of tokenized assets, stablecoins and other cryptoasset exposures.

The Bank is reassessing parts of its proposed stablecoin rules after industry feedback, reviewing elements such as a proposed reserve floor and caps on retail holdings that officials described as potentially ‘overly conservative.’ Sasha Mills, director of financial market infrastructure at the Bank, said the Bank treats stablecoins as a new form of money and expects to accept applications from prospective systemic issuers by year-end.

Sarah Breeden, deputy governor for financial stability at the Bank of England, urged public and private sector participants to build on the ‘strong foundations’ the two regulators have established as tokenization moves from pilots into production. Simon Walls, the FCA’s executive director of markets, described tokenization as able to ‘transform wholesale markets — reshaping how assets are issued, traded and settled.’ Katie Harries, head of policy for Europe at Coinbase, welcomed the joint paper as a ‘clear vision for tokenization in financial markets’ and encouraged regulators to view decentralized finance as an opportunity to deliver benefits to citizens.

Responses to the Call for Input will inform how the BoE and FCA align future rules with market practice and infrastructure. The consultation aims to reduce uncertainty for firms planning to move tokenized products from pilot stages into routine market activity.