The Financial Conduct Authority and the Bank of England have unveiled a joint strategy to support tokenization in UK wholesale markets, offering financial firms greater clarity on adopting distributed ledger technology.
In a press release issued on Monday, the regulators said tokenization, the creation of digital versions of real-world assets on blockchain-based ledgers, could make wholesale markets more efficient by streamlining asset issuance, trading and settlement.
Firms have requested clearer guidance as tokenization adoption accelerates, as noted in the release. In response, the authorities outlined their approach to areas such as prudential treatment, tokenized collateral and settlement instruments, while launching a discussion about future market infrastructure and regulation.
According to FCA executive director Simon Walls, tokenization has the potential to transform wholesale finance and help the UK remain globally competitive.
Bank of England deputy governor Sarah Breeden stated that the next stage is transitioning from pilot projects to full-scale deployment.
“The Bank and FCA have done a huge amount to enable the responsible adoption of tokenization 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,” Breeden noted.
The regulators are now seeking industry feedback to shape a joint roadmap for digital wholesale markets. Supporting initiatives include a consultation on extending RTGS and CHAPS settlement hours toward near-24/7 operations, and updated guidance from the Prudential Regulation Authority covering tokenized assets, stablecoins and digital deposits.
The FCA also said it would continue reviewing client asset rules and advancing fund tokenization policies.
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