FCA, Bank of England share tokenisation vision for UK markets
The Financial Conduct Authority (FCA) and the Bank of England have set out a shared vision for tokenisation in UK wholesale markets. They are seeking industry views to provide greater regulatory certainty for firms adopting distributed ledger technology.
Unlocking efficiency with DLT
The Financial Conduct Authority (FCA) and the Bank of England have jointly outlined a vision for tokenisation in UK wholesale markets, aiming to provide greater regulatory certainty.
Tokenisation, the process of creating digital representations of real-world assets on a distributed ledger, promises to streamline market operations, from issuing securities to managing assets.
This could lead to faster, more efficient processes, enhanced market efficiency, and resilience, alongside reduced costs.
Firms have expressed a need for clearer guidance on regulation and infrastructure as this technology evolves.
In response, the regulators have clarified their approach in key areas such as prudential treatment, tokenised collateral, and settlement instruments.
Simon Walls, executive director of markets at the FCA, stated: 'Tokenisation has the potential to transform wholesale markets – reshaping how assets are issued, traded and settled.
We want to support firms in adopting this technology to lower costs, reduce risk and unlock new services, and our partnership with the Bank of England will ensure a common approach across all parts of wholesale markets.
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Regulatory scaffolding for digital assets
The Bank of England has launched a consultation to extend RTGS and CHAPS settlement hours, aiming for near 24/7 operation to support new tokenisation-driven settlement models.
The Prudential Regulation Authority (PRA) has updated guidance on the prudential treatment of tokenised asset exposures and stablecoins.
The FCA is committed to further work, including reviewing its client asset (CASS) rules and has published a policy statement on fund tokenisation.
Sarah Breeden, deputy governor for financial stability at the Bank of England, stressed the importance of public and private sector collaboration to move from pilots to production, supporting financial stability and sustainable growth.
Clarity, not revolution
This joint vision provides much-needed regulatory clarity, which is crucial for market participants to invest confidently in tokenisation.
However, it primarily consolidates existing efforts rather than introducing radical new policy, reflecting a measured approach to innovation.
While a solid foundation, the true impact will depend on industry adoption and the speed of future regulatory adaptation.