The future of tokenisation: A joint vision from the UK authorities for wholesale financial markets

In May 2026, the Financial Conduct Authority (FCA) and the Bank of England published a joint Call for Input setting out their shared vision for the adoption of tokenisation - the digital representation of assets and their ownership using distributed ledger technology (DLT) - across the UK's wholesale financial markets. The paper, which invites industry responses by 3 July 2026, is framed within the Government's Wholesale Financial Markets Digital Strategy and is intended to provide regulatory clarity to support the issuance, trading, settlement and safekeeping of tokenised securities, including bonds, gilts and derivative instruments.

 

Context and Strategic Vision

The authorities identify tokenisation as potentially one of the most consequential changes to wholesale financial markets in decades. Their vision is of a digitally enabled wholesale ecosystem in which tokenised securities, cash and collateral move more efficiently across the trade lifecycle, anchored in central bank money settlement. Key anticipated benefits include faster settlement and collateral movement, extended or round-the-clock trading, decomposition of cashflows, improved liquidity, automation through smart contracts, and the removal of duplicate ledgers and reconciliations. For debt instruments specifically, the long-term vision anticipates that smart contracts will be used to automate coupon payments and other corporate actions, and that tokenised assets will be accepted as margin and collateral, with programmable features of blockchains used to automate collateral valuation, monitoring and liquidation. 

 

The DIGIT Pilot: Tokenised Gilts

A centrepiece of the authorities' roadmap is the Digital Gilt Instrument (DIGIT) Pilot, a Treasury-led initiative to issue digitally native UK sovereign debt on-chain. DIGIT will be short-dated, issued on a platform operating within the Digital Securities Sandbox (DSS), and independent of the Government’s main debt management programme. The Treasury awarded its tender for DLT services to HSBC in February 2026. The Bank and FCA regard DIGIT as a key initiative and are committed to supporting its success, including by considering its eligibility as collateral in the Bank’s Sterling Monetary Framework (SMF) operations and enabling issuance through the DSS. The authorities expect DIGIT to receive prudential treatment aligned with traditional government debt securities, provided that underlying risks are comparable. 

 

Regulatory Framework and the Digital Securities Sandbox

The DSS is already facilitating live, regulated activity in the issuance, trading and settlement of tokenised securities, with 16 entrants having passed through Gate 1. Notably, the DSS has set meaningful activity thresholds - GBP8-13 billion for gilts and GBP17–28 billion for sterling corporate bonds in aggregate. The authorities are committed to defining the long-term regulatory path for Digital Securities Depositories (DSDs) operating within the DSS, including a smooth transition to permanent authorisation, and will consider whether the scope of the UK Central Securities Depositories Regulation (UK CSDR) needs to be adjusted. Bonds admitted to trading on a regulated venue must continue to be settled either on a Central Securities Depository (CSD) or, where a firm wishes to settle on-chain, a DSD. 

 

Prudential Treatment and Collateral Eligibility

A core principle of the paper is the equivalent treatment of tokenised and non-tokenised assets. For PRA-regulated banks, building societies and designated investment firms, the PRA has confirmed that tokenised assets should generally receive the same prudential treatment as their non-tokenised equivalents, where legal rights are identical and underlying risks are comparable. The PRA will consult on a final prudential framework for cryptoasset exposures following the completion of the Basel Committee on Banking Supervision’s current targeted review.  It is anticipated that tokenised and non-tokenised infrastructure should be interoperable.

On collateral, the Bank is taking a phased approach to the eligibility of tokenised assets in its own SMF operations. It is also upgrading its securities and collateral management system in 2027, which will enable direct connectivity to digital asset ledgers. For central counterparties (CCPs), the Bank will set out policy considerations for how tokenised collateral that is already acceptable as regulatory collateral could qualify under UK EMIR. With the repeal and replacement of the wider UK EMIR regime under way, the authorities intend to ensure that uncleared margin rules also support the use of tokenised collateral where appropriate. The FCA and PRA are additionally reviewing the eligibility of tokenised Money Market Funds and tokenised gold as uncleared over-the-counter (OTC) derivative collateral. 

 

Settlement in Central Bank Money and Stablecoins

The authorities emphasise that wholesale settlement should remain anchored in central bank money, consistent with the CPMI’s Principles for Financial Market Infrastructures. The Bank will deliver a synchronisation service enabling atomic - or instantaneous - settlement of digital asset ledgers with central bank money held in RTGS accounts, targeting delivery in 2028. The Bank is also extending RTGS and CHAPS settlement hours, including moving towards near-24/7 settlement, and will open CHAPS from 1.30 am from September 2027. The Bank will publish an assessment of the benefits of tokenised central bank money, including a potential wholesale central bank digital currency, in 2027. 

On the role of stablecoins, the DSS already permits the use of tokenised bank deposits for on-chain settlement of securities, and will shortly be expanded to allow certain stablecoins to be used for settlement within the DSS. This forms part of an assessment of their potential for longer-term use when successful DSDs transition into the steady-state regulatory environment.

Ownership and settlement record keeping is highlighted. Safeguarding approach remains under review, taking into account market commentary about the importance of proportionality, and the importance of technology-agnostic regulation that is supportive of market development.

The FCA will publish policy statements and final rules for the UK stablecoin regime, together with prudential and safeguarding rules for qualifying cryptoassets, in the coming months. 

 

Key Principles

The authorities set out several overarching principles. Emphasising market confidence drivers, accountability, market integrity and settlement certainty, these include the requirement that an identifiable, regulated person remain accountable for each regulated activity in the value chain; the maintenance of high standards for operational resilience and cybersecurity; the preservation of orderly trading conditions, including the ability to halt or suspend trading and enforce short selling bans; and technology neutrality, whereby regulatory treatment is dictated by the risks and mitigants of the underlying activity rather than the ledger technology used. The authorities also stress the importance of domestic and international interoperability and minimising liquidity fragmentation between tokenised and non-tokenised securities and between different tokenised versions of the same security, on a “same risk, same treatment” basis. 

 

Three themes for market participants

Three themes emerge from this Call for Input which are of particular significance for firms active in fixed income and derivatives markets.

First, the collateral dimension is likely to be the most immediately transformative for debt and derivatives market participants. The authorities’ commitment to accepting tokenised assets as eligible collateral - in the Bank’s own SMF operations, at CCPs under UK EMIR, and in respect of uncleared OTC margin - has the potential to unlock substantial operational efficiencies in a market that currently moves trillions of pounds of collateral daily. If tokenised gilts, corporate bonds, MMFs and gold can be posted and mobilised on-chain with programmable valuation and automated margin calls, this would materially reduce the friction and settlement risk inherent in existing collateral management processes. Further detail around ollateral mobility and settlement finality proposals would be welcome. Market participants in the derivatives space should engage actively on the forthcoming Bank discussion paper (expected Q3/Q4 2026) on tokenised collateral eligibility at CCPs, and on the parallel work to reform uncleared margin rules within the replacement UK EMIR framework. This is where the near-term practical benefits are most tangible.

 

Secondly, the paper represents a decisive regulatory signal that the coexistence model - not a wholesale replacement - is the intended end state, and that the authorities are prepared to build the public infrastructure to support it. The synchronisation service targeting 2028, the extension of CHAPS hours, and the phased admission of stablecoins as on-chain settlement assets all indicate that the Bank intends to provide a range of mechanisms by which tokenised bond transactions can settle in central bank money or regulated private money. For issuers and arrangers in the debt capital markets, this means that tokenised issuance need not be viewed as a separate, disconnected market; instead, the regulatory architecture is being designed to allow tokenised gilts and corporate bonds to sit alongside their traditional equivalents, interoperable and fungible in economic substance. The DIGIT pilot will serve as the first practical test of this coexistence model for sovereign debt. 

 

Thirdly, and most broadly, the joint nature of this Call for Input - signed by the heads of both the FCA and the Bank of England - signals a positive degree of co-ordinated regulatory intent for supporting industry efforts. The paper is explicit that the fragmented, experiment-led phase of UK tokenisation should give way to scaled, end-to-end adoption, and that it is regulatory uncertainty, not a lack of appetite, which has hitherto held the market back. The paper refers to the importance of providing clarity, direction and trusted foundations for the industry and developing a partnership between the public and private sector around tokenisation use cases. The authorities are now inviting industry to respond not merely with views on rules, but with concrete proposals for tokenisation initiatives - whether within or outside the DSS - and to use the paper as support for internal investment cases. The Call for Input from industry will inform a finalised cross-authority roadmap later in 2026, with specific rule changes expected to be consulted on mostly in 2027. Amidst this new programme of regulatory change and engagement and assuming that the FCA and BoE have had sufficient time and opportunity to assess the Gate 2 entrants’ activities in the DSS, there is an opportunity for the statutory report under section 14 of Financial Services and Markets Act 2023 which the Treasury needs to prepare with the FCA and Bank of England on the DSS activity by 10 January 2028 to be accelerated and merged with this new roadmap of pro-tokenisation engagement and rule changes. This is given that the DSS report must publicly share an assessment of the efficiency or effectiveness of the DSS activities and would act as a vehicle for providing industry direction and market confidence.