The Financial Conduct Authority (FCA) and the Bank of England unveiled a “shared vision” for tokenization in UK wholesale financial markets on Monday, initiating a joint Call for Input to provide firms with greater regulatory and infrastructure certainty as distributed ledger technology transitions from pilot projects to full-scale implementation.
Regulatory Clarity Sought
In a statement, the regulators indicated they would clarify their approach in areas where firms seek greater clarity, including prudential treatment, tokenized collateral, and settlement instruments.
Sarah Breeden, Deputy Governor for Financial Stability at the Bank of England, encouraged both the private and public sectors to build upon the “strong foundations” established by the Bank and the FCA as the crypto industry advances “from pilots to production to support financial stability and sustainable growth.”
Simon Walls, the FCA’s Executive Director of Markets, stated that tokenization has the potential to “transform wholesale markets – reshaping how assets are issued, traded, and settled.”
Bank of England Initiatives
The central bank also confirmed plans to launch a live synchronization service targeted for 2028, to consult on extending RTGS and CHAPS settlement hours towards near 24/7 operation, and to support HM Treasury’s pilot issuance of a digital gilt instrument known as DIGIT.
Industry Response
Katie Harries, Head of Policy for Europe at Coinbase, welcomed the announcement as a “clear vision for tokenization in financial markets,” urging the BoE and FCA to embrace DeFi as an opportunity to “deliver meaningful benefits for its citizens by taking an ambitious, forward-looking approach to tokenisation.”
Ongoing Collaboration and Guidance
The Bank and the regulator noted that they continue to collaborate with 16 firms on the live issuance and settlement of tokenized assets through the Digital Securities Sandbox. The Prudential Regulation Authority has also published Dear CEO letters updating guidance on the prudential treatment of tokenized assets, stablecoins, and other cryptoasset exposures.
Broader Context
The announcement follows recent indications that the Bank of England may be considering concessions to the digital asset industry. Breeden told the Financial Times that the Bank was reviewing whether its proposed stablecoin reserve floor and retail holding caps had been “overly conservative” following industry feedback.
Breeden’s remarks followed a statement by Sasha Mills, the Bank of England’s financial market infrastructure director, at the FT Digital Asset Summit, where she stated that the Bank of England was treating stablecoins as a “new form of money” and confirmed that it expected to accept applications from prospective systemic issuers by the end of the year.
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