The Financial Conduct Authority and the Bank of England have unveiled a joint strategy to support tokenization in UK wholesale markets, offering financial firms greater clarity on adopting distributed ledger technology.
In a press release issued on Monday, the regulators said tokenization, the creation of digital versions of real-world assets on blockchain-based ledgers, could make wholesale markets more efficient by streamlining asset issuance, trading and settlement.
Firms have requested clearer guidance as tokenization adoption accelerates, as noted in the release. In response, the authorities outlined their approach to areas such as prudential treatment, tokenized collateral and settlement instruments, while launching a discussion about future market infrastructure and regulation.
According to FCA executive director Simon Walls, tokenization has the potential to transform wholesale finance and help the UK remain globally competitive.
Bank of England deputy governor Sarah Breeden stated that the next stage is transitioning from pilot projects to full-scale deployment.
