Bank of England, FCA Set Out ‘Shared Vision’ for Tokenization

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In brief - The FCA and Bank of England have launched a joint Call for Input setting out a "shared vision" for tokenisation in UK wholesale markets. - The regulator and central bank aim to clarify rules on prudential treatment, tokenised collateral, and settlement instruments. - The announcement follows a week of softening signals from the Bank of England on stablecoin rules. The Financial Conduct Authority and the Bank of England set out a “shared vision” for tokenisation in UK wholesale financial markets Monday, launching a joint Call for Input aimed at giving firms greater regulatory and infrastructure certainty as distributed ledger technology moves from “pilots to production.” In a statement, the regulators said they would clarify their approach in areas where firms want greater clarity, including prudential treatment, tokenised collateral, and settlement instruments. Sarah Breeden, deputy governor for financial stability at the Bank of England, urged the private and public sectors to build on the “strong foundations” established by the Bank and the FCA as the crypto industry moves “from pilots to production to support financial stability and sustainable growth.” Simon Walls, the FCA's executive director of markets, said tokenisation had the potential to “transform wholesale markets – reshaping how assets are issued, traded and settled.” The central bank also confirmed plans to launch a live synchronisation service targeted for 2028, to consult on extending RTGS and CHAPS settlement hours towards near 24/7 operation, and to support HM Treasury's pilot issuance of a digital gilt instrument known as DIGIT. Katie Harries, Head of Policy for Europe at Coinbase, welcomed the announcement as a “clear vision for tokenization in financial markets,” urging the BoE and FCA to embrace DeFi as an opportunity to “deliver meaningful benefits for its citizens by taking an ambitious, forward-looking approach to tokenisation.” The Bank and the regulator noted that they continue to work with 16 firms on live issuance and settlement of tokenised assets through the Digital Securities Sandbox, while the Prudential Regulation Authority has published Dear CEO letters updating guidance on the prudential treatment of tokenised assets, stablecoins and other cryptoasset exposures. The announcement comes days after the Bank of England mulled making notable concessions to the digital asset industry, with Breeden telling the Financial Times that it was reviewing whether its proposed stablecoin reserve floor and retail holding caps had been "overly conservative" following sustained industry pushback. Breeden’s remarks came a day after the central bank’s financial market infrastructure director Sasha Mills told the FT Digital Asset Summit that the Bank of England was treating stablecoins as a "new form of money" and confirmed that it expected to accept applications from would-be systemic issuers by year-end.

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