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UK’s financial payments network is ready for tokenization, regulators say
TL;DR
The Bank of England and FCA are promoting tokenization in U.K. financial markets and seeking public feedback on their proposal. They believe tokenization can enhance economic growth and innovation by transforming wholesale markets.
Key points
- Bank of England and FCA promote tokenization in financial markets
- Public feedback is being sought on the tokenization proposal
- Tokenization could transform how assets are issued and traded
- Settlement mechanisms to be extended to 24/7 operation
The Bank of England (BOE) and the Financial Conduct Authority (FCA) set out their approach to tokenization and its use in U.K. financial markets and said they are seeking public feedback on the proposal.
In a joint statement, the regulators said it's time for the public and private sectors to utilize the technology in financial infrastructure to drive economic growth and innovation. Tokenization is the process of representing a real-world asset in the digital environment of a blockchain.
"Tokenisation has the potential to transform wholesale markets – reshaping how assets are issued, traded and settled," Simon Walls, executive director of markets at the FCA, said in a statement on Monday. "We want to support firms in adopting this technology to lower costs, reduce risk and unlock new services."
The regulators said they are looking for views on "where existing rules and infrastructure support or constrain the safe use of this technology." The deadline for responses is July 3.
The central bank also published its plans to extend settlement in the country's money-transmission mechanisms to 24/7 operation.
Starting in September 2027, CHAPS, the system used for high-value and time-sensitive transfers, will extend its 12-hour weekday cycle to start as early as 1:30 a.m., a move designed to overlap with Asian trading hours. The process will also affect RTGS, the accounting system used to settle the transactions.
The central bank plans to introduce Sunday and bank holiday settlement no earlier than 2029, before pushing weekday operations to a continuous 22-hour daily window (22x6) no earlier than 2031.
Last month, the FCA published a policy statement on fund tokenization. The statement confirmed that blockchain records can now be considered a firm’s primary blocks and records, removing the redundant requirement to maintain a duplicate record offchain.
Furthermore, the FCA explained, the regulators outlined a vital runway for stablecoins, confirming they are actively modifying rules to allow the use of stablecoins to settle unit deals as an interim regime ahead of the U.K. 's finalized crypto framework coming into effect October 2027.
The BOE’s consultation paper on extending RTGS and CHAPS settlement hours accepts responses through Aug. 10.
Q&A
What is the deadline for public feedback on the tokenization proposal in the UK?
The deadline for public feedback on the tokenization proposal is July 3.
How can tokenization transform wholesale markets according to UK regulators?
UK regulators believe tokenization can reshape how assets are issued, traded, and settled, lowering costs and reducing risks.
What are the Bank of England's plans for money-transmission mechanisms?
The Bank of England plans to extend settlement in the country's money-transmission mechanisms to operate 24/7.
