Breeden: Tokenisation to boost UK financial stability
Bank of England Deputy Governor Sarah Breeden outlined how the responsible adoption of tokenisation can enhance financial stability and support sustainable growth in UK retail payments and financial markets. She emphasized the need for authorities, government, and industry to collaborate on building a tokenised finance ecosystem.
A vision for multi-money and multi-asset systems
Breeden articulated a clear vision for UK retail payments and wholesale finance within a more tokenised system.
For retail payments, the goal is a multi-money system promoting competition and choice, encompassing traditional bank deposits, tokenised bank deposits, regulated stablecoins, and potentially a retail central bank digital currency.
This approach aims to lower costs and improve functionality while strengthening monetary and financial stability.
In wholesale financial services, the focus is on dynamic, resilient markets in tokenised real-world assets like equities, bonds, and private assets, enabling more efficient movement across the trade lifecycle.
The UK aims to remain open to multi-currency wholesale activity, adhering to international standards and regulatory cooperation.
From pilots to production: The Bank's actions
The Bank of England, alongside other authorities, is actively working to realize this vision.
In retail payments, a new public-private partnership is set to deliver next-generation infrastructure, with the Bank leading the design phase.
Draft rules for systemic stablecoins are expected next month, with finalization by year-end, aligning with the US timeline.
The Prudential Regulation Authority (PRA) reaffirmed regulatory expectations for banks innovating in tokenised deposits, clarifying that banking groups can issue stablecoins via non-deposit-taking entities.
For financial markets, the Digital Securities Sandbox (DSS), launched in 2024, enables live trading and settlement systems for tokenised securities, with 16 firms preparing to launch.
The PRA also clarified that the prudential treatment of tokenised assets will generally mirror their non-tokenised equivalents.
Ambition meets implementation reality
Breeden's speech underscores a significant ambition for the UK's financial future, yet the path to full tokenisation remains complex and protracted.
While the framework is robust, the challenge lies in translating pilots into widespread production and ensuring seamless interoperability across diverse systems.
The success hinges on sustained, coordinated effort from all stakeholders, preventing a piecemeal approach to a transformative shift.