The UK government and regulators have spent several years developing their approach to digital assets. What makes the current phase different, and why do you believe regulatory clarity is now becoming a genuine catalyst for growth rather than simply a compliance exercise?
What makes this phase different is that the question has changed. For years, the debate was whether digital assets should be regulated, and they sat in a kind of parallel universe. That debate is over. Cryptoasset activities, including stablecoin issuance, custody, and trading, are now being brought within the Financial Services and Markets Act 2000 (FSMA) perimeter, while tokenised deposits remain regulated bank liabilities delivered through the UK Financial Conduct Authority’s (FCA's) final rules for regulated cryptoasset activities. The Bank of England’s (BoE) policy framework and draft code for systemic stablecoins and the FCA's final guidance on fund tokenisation all point in the same direction. This is no longer an exploration; we are now in the implementation phase. The FCA published its final policy statement and guidance in April 2026, and its broader crypto rules were finalised in June 2026, with the Bank having published its systemic stablecoin policy positions alongside.
The reason clarity acts as a catalyst rather than a compliance exercise comes down to how banks make decisions. A bank cannot commit capital and engineering resources against a risk it cannot price. Once the rules on safeguarding, anti-money laundering (AML) and sanctions screening, market abuse, and operational resilience are known, and accountability is clearly assigned, digital assets stop being an unquantifiable risk and become a manageable one. That is the difference between running a pilot and building a business.
More fundamentally, regulatory clarity turns digital assets from a technology proposition into an investable operating model. It defines who owns the customer relationship, who safeguards the asset and the keys, who carries the redemption obligation, and who absorbs losses when something fails. Once those responsibilities are explicit, banks can price risk, allocate capital, decide whether to build, buy, or partner, and move digital assets from innovation budgets into core product and revenue plans. Clarity also raises the standard for everyone in the market, and rising standards build the trust that adoption ultimately depends on.
Once the rules are clear, waiting is no longer simply a prudent response to uncertainty, it becomes a strategic choice with a competitive cost.
Digital assets are increasingly being brought within the existing financial services framework rather than regulated as a separate asset class. What are the practical implications of that shift for banks, asset managers, and other financial institutions?
For financial institutions, the shift is significant because digital assets are no longer being treated primarily as a technology category. The regulatory treatment increasingly follows the underlying economic function, legal rights, and activity such as issuing, safeguarding, trading, distributing, or managing the asset.
That means banks and asset managers can start from regulatory outcomes; they already understand safeguarding, financial crime controls, conduct, market integrity, prudential management, and operational resilience, rather than working from an entirely separate rulebook. The UK framework now applies established FCA obligations alongside activity-specific requirements for stablecoin issuance, custody, trading, staking, lending, and market abuse.
But this does not mean simply applying existing processes unchanged. Institutions still need to determine who controls the wallet and keys, how legal ownership is evidenced, how assets and client money are segregated, how transactions are reconciled across ledgers, and what happens during redemption, operational failure, or insolvency. For asset managers, the practical opportunity is to modernise fund registers, dealing, distribution, and settlement while preserving the existing fund, custody, and investor-protection framework. The FCA has now confirmed that authorised fund managers can use DLT within the current framework, including for tokenised fund registers and direct-to-fund dealing.
So the product question changes. It is no longer simply, ‘can the technology work?’, it becomes, ‘can we operate this product through our regulated value chain from issuance and distribution through custody, settlement, reporting, and exit?’. That is what allows institutions to move from experimentation to repeatable business models.
Which areas of regulatory certainty are most important in giving banks the confidence to move beyond digital asset pilot programmes and into production-scale services?
Regulatory certainty is not one rule. Banks need a stable answer at every hand-off in the product lifecycle such as issuance, distribution, custody, transfer, settlement, redemption, and failure.
The first area is perimeter and permissions: which entity is performing each regulated activity; which regulator is responsible; and whether the bank can undertake the activity under its existing permissions or needs a variation. For stablecoins, the FCA regulates UK-issued qualifying stablecoins, with joint BoE and FCA oversight where an issuer is recognised by His Majesty’s Treasury (HMT) as systemic.
The second is economic and prudential treatment. Banks need clarity on capital, liquidity, large exposures, accounting, balance sheet recognition, and the treatment of backing or reserve assets. These determine whether the product is commercially viable, not simply whether it is legally permissible. The Prudential Regulation Authority (PRA) has emphasised that the prudential treatment should reflect the specific risk characteristics of the relevant tokenised asset, stablecoin, or cryptoasset exposure.
The third is the operating and failure model. Safeguarding, legal ownership, redemption rights, settlement finality, private-key responsibility, outsourcing, operational resilience, reconciliation, resolution, and customer treatment if an issuer or custodian fails.
These rules determine where accountability and loss ultimately sit. Once those points are sufficiently clear, a bank can integrate the product into its general ledger, treasury, core banking environment, payment hubs, financial-crime controls, and regulatory reporting. That is the real threshold for production. A pilot proves that the technology works; production proves that the operating model works under normal conditions, stress, and failure.
Timelines also matter because bank implementation is a multi-year programme. Firms need final rules, application windows, transitional arrangements, and effective dates early enough to sequence governance, funding, architecture, and delivery. The FCA’s authorisation gateway is scheduled to open on 30 September 2026, with the expanded regime applying from 25 October 2027. Banks do not need every rule to remain static forever. They need the regulatory landscape to be stable enough to design against.
Stablecoins and tokenised deposits are often discussed together, but they serve different purposes and raise different regulatory considerations. How do you see these two areas evolving within the UK’s emerging framework?
They are often together because both can provide programmable, digitally transferable money. But economically, legally, and operationally, they are different instruments. A tokenised deposit is a digital representation of a deposit claim against a commercial bank. It remains a liability of the issuing bank and therefore sits within the established banking framework for capital, liquidity, conduct, and depositor protection. For UK retail customers, the PRA expects tokenised deposits to meet the applicable Financial Services Compensation Scheme (FSCS) depositor-protection and operational requirements. A stablecoin is a separate money-like instrument issued against a pool of backing assets or a specific asset. The holder’s primary right is to redeem against the issuer under the applicable terms. That creates a distinct regulatory model around backing, safeguarding, redemption, and custody. The UK framework reflects that distinction. Non-systemic UK qualifying stablecoin issuers are regulated by the FCA. Where an issuer is recognised by HMT as systemic, it moves into joint BoE and FCA regulation, with the Bank focused primarily on financial stability and the FCA continuing to address conduct, consumer protection, and market integrity.
Banks are likely to lead with tokenised deposits where the priority is settlement efficiency and keeping deposits on the balance sheet, and to use stablecoins where open networks and cross-border reach. From a product perspective, banks may favour tokenised deposits where they want programmability and faster settlement without moving customer money outside the deposit relationship. Stablecoins may be more attractive where portability across institutions, platforms, or networks is a central requirement. But that is not a rigid division — both instruments can support domestic, cross-border, retail, and wholesale use cases depending on how the network, distribution, and redemption model are designed.
The more important question is therefore not which token format wins. It is which form of money is appropriate for a particular use case, who carries the liability, what protections the holder receives, and how the instrument converts at par into other forms of money. That points towards a multi-money market rather than a single dominant instrument. The winning infrastructure will be able to support tokenised deposits and stablecoins through common capabilities for identity, compliance, wallet control, settlement, reconciliation, and reporting, while preserving the distinct legal and regulatory treatment of each. Customers may not want to understand the underlying architecture every time they make a payment. But the institutions providing that payment must understand exactly where the money sits, who owes it, how it is redeemed, and what happens if part of the chain fails.
The conversation around digital assets has shifted noticeably over the past few years. What are the key discussions taking place today that were largely absent from industry debates three or four years ago?
Three or four years ago, the conversation was dominated by price, speculation, and whether serious institutions should be involved at all. Today, the question is not should they be involved, it's what role they want to play in this ecosystem, and the conversations have become strikingly operational.
Two other dimensions have become materially more important. The first is that network fragmentation has moved from a technical concern to a production constraint. Fragmentation itself isn't new. What's new is that institutions now need to make long-term architecture, liquidity, and operational model decisions across multiple networks moving towards live use cases So many platforms and networks have emerged, each with its own pocket of liquidity, that banks are now having to make genuinely strategic choices about which to join, knowing they cannot integrate with all of them, and many expect a wave of consolidation before committing. Point-to-point integration with every network is neither scalable nor commercially rational. The limitation isn't purely technical; it's the cost and complexity of duplicating connectivity, controls, liquidity, and operational support.
The second shift is that banks are beginning to trade digital assets as an enterprise capability rather than a collection of isolated products. Stablecoins, tokenised deposits, and tokenised securities may have different legal and commercial models, but they draw on many of the same capabilities such as identity, compliance, wallet, controls, settlement, reconciliation, and reporting.
A further change is that the strategic discussion has moved from the asset itself to control of the value chain. Banks are deciding where they need to own the customer relationship, balance sheet exposure, liquidity, compliance, and settlement, and where shared infrastructure or partners are sufficient. The differentiator will not be access to one ledger. It will be the ability to move regulated value across multiple networks and forms of money without recreating the operational model each time.
The debate has moved from ideology to engineering, and that is usually the sign that technology is about to become mainstream. Three or four years ago, success meant proving that a transaction could happen onchain. Today it means proving that the model can scale economically, integrate with the financial system, and continue to operate under stress.
The UK framework involves multiple authorities, including HM Treasury, the Bank of England, and the FCA. How important will coordination between these bodies be, and what risks arise if implementation is not aligned across the regulatory landscape?
Coordination is the single biggest execution risk. Each authority has a legitimate role. HM Treasury sets policy and the statutory perimeter, the FCA authorises and supervises most regulated cryptoasset activities and conduct, the BoE addresses financial stability and systemic payment risk, and the PRA determines the prudential treatment for banks. Where a stablecoin issuer is recognised as systemic, the Bank and FCA regulate it jointly rather than through a separate exclusive regimes.
But a bank building digital asset infrastructure experiences all three as one framework, and it is only as coherent as its seams.
Regulators can divide responsibilities; firms cannot divide the product. The real test is therefore whether the handoffs work across the full lifecycle from authorisation and issuance through custody, settlement, prudential treatment, and failure. If definitions diverge, timelines slip, or requirements duplicate, the result is exactly the hesitation the framework is designed to end. Banks will not build against a moving target, and there is still a degree of confusion in the market today about how the pieces fit together. The remaining risk is increasingly concentrated at the interfaces, whether authorities use the same definitions, whether evidence can be reused across regulatory processes, whether implementation dates align, and which regulator leads when a product changes function or becomes systemic.
There is also a competitiveness dimension. The Markets in Crypto-Assets (MiCA) regulation is fully applicable across the EU, and the US has already enacted a federal stablecoin framework, and capital and talent are mobile. The UK’s framework is well designed; the question is whether it is implemented in a joined-up way and at pace. Coordination should therefore be judged through practical outputs, a common taxonomy, one regulatory lifecycle map, aligned implementation dates, proportionate information requests, and a clear lead authority at each stage. That is what turns a multi-authority regime into a buildable product environment. The encouraging precedent is the joint FCA and BoE work on wholesale tokenisation, which shows the authorities can present the industry with a single, shared vision. The more of that, the faster this market grows.
Looking ahead over the next three to five years, which digital asset use cases do you believe are most likely to benefit from greater regulatory certainty, and where do you expect adoption to accelerate first?
Adoption will accelerate first where the economic benefit is measurable, the participants are known, and the path into production is shortest. That will generally favour institutional markets before mass market consumer propositions. The wholesale market adoption depends on the ecosystem of banks, asset managers, market infrastructures, and technology providers. That points to wholesale payments and securities settlement, using tokenised deposits, regulated stablecoin, or central bank money as a settlement asset. 24/7 availability, delivery versus payment (DvP), and payment versus payment (PvP) transactions in which the asset and cash legs settle together or neither settles, and dramatically reduced reconciliation overhead, are benefits a bank can quantify today.
Cross-border payments follow closely, because always on settlement can reduce cut off delays, settlement exposure, and some prefunding requirements in correspondent banking, but it does not remove the liquidity problem by itself — firms still need funding, FX liquidity, and interoperability across currencies and networks.
Fund tokenisation is already moving beyond initial experimentation. The next stage is broader issuance, distribution, and use of tokenised fund units, including the potential use as a collateral and settlement assets. Next, with the regulatory groundwork now being laid in the UK, and behind it the tokenisation of real-world assets, from gold and silver to collateral more broadly, where mobility and fractionalisation open genuinely new markets. Collateral mobility may scale earlier than broad fractional ownership because it solves an immediate institutional problem: moving eligible assets more quickly between trading, clearing, treasury, and liquidity management functions. Fractionalisation may widen access, but it does not create demand or secondary market liquidity on its own. Consumer-facing adoption is likely to take longer, but not because consumers are focused on settlement architecture. Most will care about price, convenience, acceptance, protection, and whether the service is materially better than existing payment methods.
Retail adoption therefore depends on distribution, merchant acceptance, interoperability, and trust, not simply on technical readiness. A digital pound remains a strategic possibility rather than a forecast. The BoE and HMT have not decided whether to proceed, and are due to conclude the current design phase and announce the next steps in 2026. The first scaled winners are therefore unlikely to be the most novel assets. There, they will be the workflows where tokenisation removes a measurable balance sheet, liquidity, or operational cost without requiring the entire market to change at once. The product and challenge is not just putting an asset on a ledger; it is connecting the assets, the settlement money, and the existing financial infrastructure into one commercially viable operating model.
Next interview →
Linework
Noel Damien Foti
.jpg)
Image: FIS 
