The Financial Conduct Authority (FCA) and Bank of England (BoE) have launched a joint consultation seeking industry feedback on tokenization regulation, with industry replies due by July 3. According to the joint statement, the consultation coincides with a global shift in legislators' attention from retail cryptocurrency speculation to regulated institutional use cases, including digital settlement rails, tokenized bonds, stocks, and collateral systems. The regulators stated that the government's Wholesale Financial Markets Digital Strategy identified tokenization as a significant opportunity, particularly in post-trade processes and collateral, with this Call for Input building on that approach and strengthening the government's newly designated Wholesale Digital Markets Champion's position. The authorities emphasized that the project will provide firms with the legislative clarity they need to invest in and expand tokenized financial market infrastructure.
The Bank of England's Deputy Governor for Financial Stability, Sarah Breeden, outlined a comprehensive vision for modernizing UK finance through tokenization during her Tuesday speech at London's City Week 2026 conference. According to reports from The Block, Breeden emphasized that the central bank will focus its future strategy on tokenization to modernize finance in the UK, with the future retail payment system featuring multiple forms of interchangeable money, including tokenized deposits and stablecoins. Speaking at the conference, Breeden highlighted that shared ledger technology can make payments cheaper and faster by reducing the number of intermediaries, while smart contracts can introduce customization, conditionality and automation, which could improve efficiency in retail payments. Breeden stated that tokenized finance could help make payments faster, cheaper, and more efficient for both businesses and consumers, with shared digital ledgers and smart contracts reducing delays by automating parts of the payment process.
The Bank of England continues to support the Digital Gilt initiative, the UK government's pilot tokenized sovereign bond, while the central bank will present conclusions of its design phase for a central bank digital currency (CBDC) project later this year. According to PANews, the Bank and the Financial Conduct Authority have been advancing a pilot program for tokenized securities through the Digital Securities Sandbox, with 16 firms preparing to launch on the sandbox from late 2026, including major participants like Euroclear, HSBC, and London Stock Exchange Group. The Bank is also expanding tokenized finance infrastructure across wholesale markets, with Sixteen firms, including HSBC and London Stock Exchange Group, preparing tokenized trading and settlement services through the UK's Digital Securities Sandbox. The central bank is also doing 'a great deal' to support responsible adoption of artificial intelligence, including in agentic payments and commerce.
The central bank has established clear regulatory guidelines for tokenized assets, with prudential treatment of UK banks' exposures to tokenized assets being the same as for their non-tokenized equivalents where legal rights are identical and underlying risks are comparable. As reported by The Block, Breeden emphasized that the bank wants a multi-money system that promotes competition and choice between robust forms of money, allowing people to pay with tokenized bank deposits, regulated stablecoins, and potentially a retail central bank digital currency alongside traditional bank deposits. The consultation specifically targets banks, investment firms, asset managers, trading venues, fintech companies, central counterparties, and central securities depositories that are creating tokenization infrastructure in the UK. The consultation follows a series of initiatives already launched by the BoE and the Financial Conduct Authority to test distributed ledger technology and tokenization in regulated financial markets, with authorities noting that tokenized assets such as bonds, stocks, and fund units remain the main focus of the current framework.
The UK's tokenization initiatives align with global movements, as Japan's ruling Liberal Democratic Party officially made its position to build the future financial system using AI and blockchain, centering around tokenization, stablecoins, and agentic commerce. According to The Block, Breeden concluded that the task now is for authorities, government and industry to build on the UK's strong foundations to show that they are deepening their tokenized finance ecosystem, with the Bank of England supporting responsible adoption of AI including agentic payments and commerce. The broader agenda aligns the UK with international efforts to reshape financial markets and payments through distributed ledger technology and tokenization. The Bank is now working with the Financial Conduct Authority (FCA) and industry groups to develop the next generation of UK payment systems, with officials aiming to connect directly with tokenized asset networks by 2027 as part of broader infrastructure upgrades. The consultation marks a major step in the nation's larger effort to incorporate digital assets into mainstream finance, with authorities increasingly viewing tokenization as a component of the next generation of financial market infrastructure rather than treating digital assets exclusively as speculative vehicles.
