The Financial Conduct Authority (FCA) and the Bank of England have laid out their joint approach for the development of tokenisation in UK wholesale markets and have opened up the proposal for public consultation.
Under the shared vision, the FCA and central bank identified key areas where firms required greater clarity from feedback, including prudential treatment, tokenised collateral, settlement instruments, and have outlined their stance across these areas.
Tokenisation is the process of generating a digital representation of a real-world asset, such as a bond or unit of currency, on a digital ledger.
They have launched public consultation to gain industry perspectives where current frameworks and systems support or limit the secure use of this technology.
The consultation is intended to assist in informing the next steps of creating a blueprint for digital wholesale markets.
The Bank of England also released a consultation on extending Real-Time Gross Settlement and Clearing House Automated Payment System (CHAPS) settlement hours, setting out the path toward near 24/7 settlement.
The staged approach includes weekend and extended daily operating hours, and will support cross-border payments and new payment and settlement models as tokenisation develops.
The Prudential Regulation Authority (PRA) has published Dear CEO letters setting out updated guidance on the prudential treatment of tokenised asset exposures and on innovations in deposits, e-money, and stablecoins.
Simon Walls, executive director of markets, FCA, remarks: “Tokenisation has the potential to transform wholesale markets — reshaping how assets are issued, traded, and settled.
He continues: “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.'
Sarah Breeden, deputy governor for financial stability, Bank of England, adds: “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.”
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