Tokenised clearing collateral must meet existing risk standards
Tokenised collateral can fit existing central clearing rules, the Bank of England (BoE) says in a consultation on its supervisory approach. Eligible assets must remain usable under stress; responses close on February 12, 2027.
Same standards, different arrangements
The BoE considers the existing regulatory framework no barrier to central counterparties (CCPs) accepting tokenised forms of eligible collateral, provided they meet central clearing standards.
Collateral must remain capable of being valued, transferred and realised when needed, including under stressed conditions.
A proposed Supervisory Statement would clarify how the BoE assesses applications involving tokenised collateral.
It applies the principle of same risk, same regulatory outcome, while allowing different arrangements to achieve those outcomes in different ways.
The consultation seeks responses from CCPs, market participants, infrastructure providers, technology firms and other stakeholders.
Faster mobilisation across borders
The BoE says tokenisation offers scope for faster collateral mobilisation and management across jurisdictions, helping firms meet margin calls more effectively.
Deputy Governor for Financial Stability Sarah Breeden links the consultation to the Bank's secondary objective for innovation in financial market infrastructure while maintaining stability.
The work involves the Financial Conduct Authority (FCA), HM Treasury and industry and supports the UK's wholesale digital financial markets strategy.
Eligibility is not enough
Tokenisation does not remove the requirement for collateral to remain usable under stress.
The proposed approach allows different arrangements to meet the same regulatory outcomes.
The consultation concerns how the BoE assesses applications, not a relaxation of central clearing standards.