UK and French authorities step up financial tokenisation efforts
The UK’s Financial Conduct Authority (FCA) and Bank of England (BoE) have this week set out a ‘shared vision’ on financial tokenisation – a boom topic in finance globally.
Financial tokenisation is the issuance and recording of financial assets and liabilities in the form of digital tokens using distributed-ledger technology (DLT). It has become increasingly mainstream as a financial topic, with authorities worldwide striving to establish clear legal frameworks as jurisdictions compete to attract financial institutions in a rapidly growing global market.
The FCA and BoE have ‘heard from industry that firms need more certainty on regulation and infrastructure as tokenisation grows’, the UK authorities state (18 May). They have set out their approach in areas where companies want greater clarity, including prudential treatment, tokenised collateral and settlement instruments.
A 28-page ‘Call for input: the future of tokenisation – a joint vision for UK wholesale financial markets’ (with a 3 July deadline for responses) contains eight questions. A feedback statement will be published in the summer.
French financial authorities, including the European Union (EU) member state’s Treasury, have also recently launched a strategy group focused on encouraging tokenisation (see lower down this article).
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Transformational potential
‘This is a fast-moving area, and our approach and strategy will need to be nimble and adapt as technology changes,’ the two authorities’ respective leaders – FCA chief executive Nikhil Rathi and BoE governor Andrew Bailey – write in the foreword of the call for input, adding that they are ‘working with the sector to make this happen.’
“Tokenisation has the potential to transform wholesale markets — reshaping how assets are issued, traded and settled,” said FCA executive director of markets Simon Walls in a press release. “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.”
“We are setting out the principles of a shared long-term vision to give industry the clarity it needs to engage, invest and innovate with confidence,” he continued.
“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,” said BoE deputy governor for financial stability Sarah Breeden in the same press release.
“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,” she said.
Breeden also delivered a speech (titled ‘Modernising money and markets’) on 19 May in London stating that “the task now is for authorities, government and industry to build on the UK’s strong foundations – to put some ‘runs on the board’ and show that we are deepening our tokenised finance ecosystem.”
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Multiple relevant initiatives
The BoE has also published (18 May) a consultation on extending RTGS and CHAPS settlement hours, setting out next steps towards ‘near 24/7’ settlement (RTGS stands for ‘Real-Time Gross Settlement’ and CHAPS is the UK’s high-value payment system). This will support cross-border payments, ‘and new payment and settlement models as tokenisation develops,’ the authorities state.
The Prudential Regulation Authority (PRA), meanwhile, has published (also on 18 May) ‘Dear CEO’ letters setting out updated guidance on the prudential treatment of tokenised asset exposures and on innovations in deposits, e-money and stablecoins.
The FCA recently (30 April) published an 88-page policy statement on progressing fund tokenisation.
In addition, the FCA and BoE continue to work with 16 firms on the live issuance and settlement of tokenised assets through the Digital Securities Sandbox (DSS), which began operations last autumn. The sandbox will run until January 2029.
The UK government last month announced that the appointment of a ‘wholesale digital markets champion’ to front a push to accelerate the adoption of tokenisation and new technologies. Chris Woolard CBE, a former interim chief executive of the FCA, will ‘lead the government’s work to deliver a more efficient and competitive financial sector by building a tokenised wholesale financial markets system.’
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French authorities’ strategic group
Across the Channel, the three pillars of France’s economic and financial regulatory architecture launched a strategy group focused on encouraging financial tokenisation just a couple of months ago.
DG Trésor (Directorate General of the Treasury), Autorité des marchés financiers (AMF) and Banque de France (BdF) have established the ‘Groupe Stratégique Innovation et Tokenisation’ (GSIT) to ‘facilitate the widespread and effective’ adoption of financial tokenisation – the issuance and recording of financial assets and liabilities in the form of digital tokens using DLT.
The three French authorities are specifically looking to foster concrete projects and to ‘identify the risks that slow adoption of these technologies would pose to the competitiveness of the European financial centre, and even to the financial sovereignty of the European Union,’ a press release (12 March) stated.
The group is being co-led by DG Trésor financial sector department head Christophe Bories; AMF secretary-general Sébastien Raspiller; and BdF first deputy governor Denis Beau, who is also chairman-designate of the Autorité de contrôle prudentiel et de résolution (ACPR – the French Prudential Supervision and Resolution Authority).
Companies that are part of the financial market ecosystem, such as issuers, investors, financial intermediaries and infrastructure providers, are all represented.
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Eurozone developments
The BdF is among the forerunners among central banks globally in testing DLT, mainly focusing on wholesale central dank digital currencies (wCBDC) and asset tokenisation.
The central bank is one of the most influential members of the Eurosystem, which comprises the Frankfurt-headquartered European Central Bank (ECB) and national central banks of the 21 EU member states whose currency is the euro.
A ‘roadmap’ for a strategic initiative to shape the development of a European tokenised financial ecosystem ‘in which central bank money continues to play a central role’ was published by the Eurosystem on 11 March (one day before DSIT’s launch was announced). One track of this Eurosystem work, named ‘Pontes’, will offer a Eurosystem DLT-based solution, linking DLT platforms and TARGET Services to settle transactions in central bank money. (TARGET Services are financial market infrastructure services including T2 for settling payments, T2S for settling securities and TIPS for settling instant payments).
A second track of work, named ‘Appia’, is looking to steer the Eurosystem and public- and private-sector organations in building ‘integrated, innovative and resilient’ tokenised wholesale financial markets. The Eurosystem ‘plans to crystallise its vision’ in a blueprint to be published in 2028.
The GSIT press notice referred to pan-European considerations, including the Savings and Investments Union (SIU) – a set of EU initiatives launched in March 2025. GSIT’s agenda is ‘fully aligned with the European agenda for a Savings and Investment Union and aims to support the launch in autumn 2026 of a central bank digital interbank money, known as a “wholesale” digital currency, in euros, by the central banks of the Eurosystem,’ the notice stated.
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Franco-German taskforce
GSIT will also feed in to a ‘Franco-German Task Force on the Future of Digital Finance’ launched by the French and German governments in January.
This initiative ‘aims to develop concrete strategies to strengthen Europe’s sovereignty, competitiveness and resilience in the field of digital finance, while fostering large-scale innovation in the [European] Single Market.’
France’s minister of the economy, finance and industrial, energy and digital sovereignty Roland Lescure and Germany’s finance minister Lars Klingbeil last month (22 April) appointed the taskforce’s co-chairs: Alain Demarolle, a financial investor and former special adviser to the French PM and economy minister; and Tim Armbruster, group treasurer and head of financial markets at German state-owned promotional and development bank KfW Group.
‘In close collaboration with public and private stakeholders, the Task Force will explore ways to promote euro-denominated digital payments, in order to strengthen the resilience and competitiveness of the European payments ecosystem,’ the two governments’ finance ministries explained in a news release. ‘It will also assess the potential of DLTs in financial markets to improve efficiency, deepen capital market integration and open up new funding avenues for companies in Europe.’
‘A wide range of public and private actors will be consulted to gather their perspectives and proposals,’ the release continued, adding that interim conclusions will be presented in June 2026, followed by a full report during the second half of 2026.
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French group’s workstreams
Concrete projects mentioned in the press release on GSIT’s launch include: the implementation of a private settlement asset in tokenised form (tokenised deposits and stablecoins) and its integration with the interbank CBDC (wholesale CBDC); and tokenisation of the financial instruments market, starting with the market for short-term negotiable debt securities (Negotiable European Commercial Paper – NEU-CP – a short-term, unsecured debt instrument issued by companies and financial institutions in the French financial market).
Organisations participating in GSIT are listed as the Association Française des Trésoriers d’Entreprise (AFTE), Amundi, Ardian, BNP Asset Management, BNP Paribas, Caisse des Dépôt et Consignations, Crédit Agricole, Euroclear, Euronext, Groupe BPCE, LCH SA, OFI Invest & Société Générale.
But ‘opportunities to contribute to the various concrete projects will be open to non-participating entities.’
GSIT’s workstreams have been split into four sub-groups, corresponding to tokenisation use-cases in the financial sector: tokenised private settlement assets; tokenised infrastructures; tokenized financial instruments; and tokenised funds. Each sub-group (which each comprise about 15 participants and is chaired by a private-sector executive) is in the throes of defining tokenisation development scenarios, success conditions and use cases around which further discussions and recommendations will focus.
A report containing technical analyses and concrete recommendations will be published in the summer.
