The FCA and the Bank of England are seeking industry views on the future of UK wholesale markets after they jointly published their vision for tokenisation.
Tokenisation is the process of creating a digital representation of a real-world asset — such as a share, bond or unit of currency — on a digital ledger.
Today the two regulators said tokenisation has the potential to streamline wholesale markets, making everything from issuing securities to managing assets faster and more efficient.
They said along with greater functionality, it could support market efficiency and resilience while lowering costs.
They said they have heard from industry that firms need more certainty on regulation and infrastructure as tokenisation grows. In response, the FCA and BOE have set out their approach in key areas where firms want greater clarity, including prudential treatment, tokenised collateral and settlement instruments.
They have also opened a discussion on key principles for regulation and infrastructure that could facilitate the development of tokenisation in wholesale markets.
Simon Walls, executive director of markets at the FCA said: "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.”
He said UK markets have always embraced new technology, and that will be central to ensuring the UK remains at the forefront of global wholesale markets.
Sarah Breeden, deputy governor for financial stability at the Bank of England said: “The Bank and FCA have done a huge amount to enable the responsible adoption of tokenisation in retail and wholesale finance in the UK, working with the government and the industry. The task now is for public and private sectors together to build on these strong foundations, moving from pilots to production to support financial stability and sustainable growth.”
The FCA and the Bank of England are seeking industry views on where existing rules and infrastructure support or constrain the safe use of the technology. They said feedback will help shape future work and inform the next steps of developing a joint roadmap for digital wholesale markets.
The deadline for feedback is 3 July. The FCA and BOE promised that a feedback statement will be published in the summer.