Why does a joint paper from the FCA and the BoE matter more than the usual run of consultations we have seen on this topic?
Sophie Lessar: Because it's joint. That's not a small detail, it's signed by the heads of both authorities, and it signals a coordinated regulatory intent that the market hasn't had before. For a while, tokenisation in the UK has felt fragmented and experiment-led, pilots here, sandboxes there, without a clear sense of how it all knits together. This paper is explicit that phase needs to give way to scaled, end-to-end adoption. And crucially, it states plainly that it's regulatory uncertainty that has held things back until now. That's the authorities essentially saying: the brakes are coming off.
What is the actual vision they are describing?
Lessar: A digitally enabled wholesale ecosystem where tokenised securities, cash, and collateral move far more efficiently through the trade lifecycle — but anchored, importantly, in central bank money settlement. Think faster settlement, round-the-clock trading, automation through smart contracts, and the removal of duplicate ledgers and reconciliations that currently eat up so much operational cost. For debt instruments specifically, the long-term vision has smart contracts automating coupon payments and other corporate actions, and tokenised assets being accepted as margin and collateral, with the valuation, monitoring and even liquidation of that collateral automated through programmable features of the blockchain.
What exactly is DIGIT, the tokenised gilt pilot?
Paul Landless: DIGIT is the Digital Gilt Instrument pilot, a Treasury-led initiative to issue digitally native UK sovereign debt onchain. It's short-dated, it sits within the Digital Securities Sandbox, and it's deliberately kept independent of the government's main debt management programme. HSBC won the Treasury's tender for DLT services back in February 2026. What's notable is how seriously the Bank of England (BoE) and the Financial Conduct Authority (FCA) are backing it.
They're committed to supporting its success, including considering DIGIT's eligibility as collateral in the Bank's Sterling Monetary Framework operations. There's also an expectation that DIGIT will receive prudential treatment aligned with traditional gilts, provided the underlying risks are genuinely comparable.
Why does a pilot this size matter to the wider market?
Lessar: Because it's the first practical test of what the authorities call the coexistence model. This isn't about tokenised markets replacing traditional ones, it's about building the infrastructure so tokenised gilts and corporate bonds can sit alongside and integrate with their traditional equivalents, interoperable and fungible in economic substance. If DIGIT works, it becomes the proof point that everything else in the paper is built around.
The Digital Securities Sandbox already has activity in it. What is happening there today?
Landless: It's live and it's regulated — 16 entrants have already passed through Gate 1, working on issuance, trading, and settlement of tokenised securities. The Sandbox has set real activity thresholds too, between £8–13 billion for gilts, and £17–28 billion for sterling corporate bonds in aggregate.
So this isn't theoretical. The authorities are now working out the long-term regulatory path for Digital Securities Depositories operating within the Sandbox, including how firms transition smoothly to permanent authorisation, and whether the scope of UK Central Securities Depositories Regulation (CSDR) needs adjusting to accommodate it.
Why is collateral the part you would flag as most significant for fixed income and derivatives desks specifically?
Landless: Because it's where the near-term, tangible benefit sits. The authorities have committed to accepting tokenised assets as eligible collateral, in the Bank's own operations, at central counterparties (CCPs) under UK EMIR, and for uncleared OTC margin. We're talking about a market that moves trillions of pounds of collateral daily.
If tokenised gilts, corporate bonds, money market funds, and even gold can be posted and mobilised onchain, with programmable valuation and automated margin calls, that's a material reduction in the friction and settlement risk that's baked into current collateral processes.
My advice to anyone active in derivatives is to engage directly with the Bank's discussion paper on tokenised collateral eligibility at CCPs, expected in Q3 or Q4 this year, and with the parallel reform of uncleared margin rules under the replacement UK EMIR regime. That's where the practical value lands first.
There is a principle in the paper about tokenised and non-tokenised assets receiving equivalent treatment. Can you tell us more about that?
Landless: It's foundational. For Prudential Regulation Authority (PRA)-regulated banks, building societies, and designated investment firms, the PRA has confirmed tokenised assets should generally get the same prudential treatment as their non-tokenised equivalents, provided the legal rights are identical and the underlying risks are genuinely comparable.
A final framework for cryptoasset exposures will follow once the Basel Committee finishes its current targeted review. The expectation is that tokenised and non-tokenised infrastructure will ultimately be interoperable, which matters enormously for firms trying to build a business case internally, nobody wants to build tokenised infrastructure that gets penalised relative to the traditional equivalent.
Settlement in central bank money is emphasised throughout. What is actually changing?
Lessar: The principle is that wholesale settlement stays anchored in central bank money, consistent with the Committee on Payments and Market Infrastructures’ (CPMI's) Principles for Financial Market Infrastructures (PFMI). Practically, the Bank is building a synchronisation service to enable atomic, instantaneous settlement between digital asset ledgers and central bank money held in real-time gross settlement (RTGS) accounts, targeting 2028.
Alongside that, RTGS and Clearing House Automated Payment System (CHAPS) operating hours are being extended toward near-24/7 settlement, with CHAPS opening from 01:00 starting September 2027. And the Bank will publish an assessment of tokenised central bank money, including the case for a wholesale CBDC, in 2027.
Where do stablecoins fit into a settlement model built around central bank money?
Lessar: The Sandbox already permits tokenised bank deposits for onchain settlement of securities, and that's shortly being expanded to allow certain stablecoins to be used for settlement within the Sandbox too. It's part of a broader assessment of their longer-term role once successful Digital Securities Depositories transition into the steady-state regulatory environment.
Alongside that, the FCA has just published policy statements and final rules for the UK stablecoin regime, together with prudential and safeguarding rules for qualifying cryptoassets. Safeguarding proposals have also been under review, with the authorities having weighed up market feedback on proportionality and the need for technology-agnostic regulation that doesn't get overtaken by the pace of the market.
What are the core principles underpinning all of this, the things that do not change regardless of which technology is used?
Landless: A handful stand out. There must always be an identifiable, regulated person accountable for each regulated activity in the value chain, tokenisation doesn't dissolve accountability. High standards for operational resilience and cybersecurity are preserved.
Orderly trading conditions are maintained, including the ability to halt trading or enforce short selling bans.
And technology neutrality is central, the regulatory treatment follows the risk of the activity, not the ledger it happens to run on. There's also a strong emphasis on interoperability, both domestically and internationally, and on minimising liquidity fragmentation, whether that's between tokenised and traditional securities, or between different tokenised versions of the same security. Same risk, same treatment.
If you had to boil this down to three things market participants should take away, what would they be?
Landless: First, collateral is where the near-term opportunity is most tangible, engage with the Bank's forthcoming discussion paper and the UK EMIR reform work now, not later. Second, this is a coexistence signal, not a replacement signal, the authorities are building public infrastructure so tokenised and traditional markets can sit side by side, and DIGIT is the live test case for that.
Third, the joint nature of this paper is itself the message, it's a statement of coordinated regulatory intent, and the authorities are explicitly asking industry not just for views on rules, but for concrete tokenisation proposals, inside or outside the Sandbox, that firms can use to support their own internal investment cases.
What happens after the 3 July deadline and what should the market be watching for next?
Lessar: The responses feed into a finalised cross-authority roadmap later this year, with specific rule changes expected to be consulted on largely through 2027. There's also an interesting procedural opportunity worth watching: under section 14 of the Financial Services and Markets Act 2023, the Treasury has to prepare a statutory report with the FCA and Bank on Digital Securities Sandbox activity by 10 January 2028.
If the authorities have had enough time to properly assess the Gate 2 entrants by then, there's a real case for accelerating that report and merging it with this new roadmap.
That report has to publicly assess how effective the Sandbox has actually been, so it could become a genuinely important vehicle for giving the market direction and confidence, rather than just a compliance formality.
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