Tokenisation of UK Wholesale Capital Markets: Key Takeaways from the FCA‘s and Bank of England’s Call for Input

This Legal Update summarises the joint Call for Input published by the Financial Conduct Authority ("FCA") and the Bank of England ("BoE") (together, the "regulators") in May 2026. The paper invites industry responses by 3 July 2026.

What is the Purpose of this Consultation?

The goal of the Call for Input is to seek industry feedback on the proposed regulatory approach to tokenisation. The paper is aimed at "firms across the wholesale ecosystem and the focus is on tokenised securities (such as bonds, cash equities and fund units)". The aim is for a digitally enabled wholesale markets ecosystem in which tokenised securities, cash and collateral move more efficiently across the trade lifecycle. The proposed end state is for this ecosystem to be anchored in central bank money settlement.

The paper:

• Provides a set of agreed regulatory principles and operational considerations that the regulators intend to follow in any future changes to policy and regulation in this area; and
• Clarifies a set of key priority areas where further regulation is required and offers an initial regulatory roadmap of initiatives that will support the market evolution.

A series of high level questions are posed to market participants as a call for input to help frame further regulation in this area. 

What are the Proposed Regulatory Principles to Guide Tokenisation Rulemaking?

The regulators state these principles are required because the decentralised nature of distributed ledger technology ("DLT") presents particular challenges to the application of existing UK financial regulation.

• Accountability: For all regulated activities, there must continue to be a responsible, identifiable, regulated person standing behind the activity. During certain tokenised securities transactions, regulated activity may take place where there is no identifiable person performing it, for example, on a decentralised exchange or certain public permissionless ledgers. The regulators would need to determine, in such circumstances, who the relevant UK regulatory requirements should apply to.
• Operational resilience: Regulated firms using blockchains should conduct initial and ongoing assessments of suitability in areas such as governance and cybersecurity and undertake appropriate exit planning. In addition to cyber-attacks, the regulators note new risks, including from 50+1 attacks, where an attacker takes control of the voting power and can, therefore, determine what is considered to be the correct version of the ledger.
• Fair, orderly, and resilient trading: Tokenised markets must retain the ability to halt or suspend trading in these assets, enforce short selling bans, and maintain systems and controls to detect, disrupt and prevent market abuse.
• AML/KYC compliance: All primary and secondary market participants must be subject to KYC checks, potentially implemented through permitted list blockchain addresses with programmable freezing and clawback functionality.
• Relationship between tokenised securities and investors: Information flow between shareholders/bondholders and issuers must be maintained notwithstanding technological intermediaries. Information transparency standards and corporate governance standards must be upheld.
• Treatment of non-natively issued tokens: Currently, where equity tokens are marketed to retail customers, the regulators have observed that they are generally referred to as "equity exposure tokens" (i.e., tokenised derivatives or depository receipts, with the underlying non-tokenised security isolated). Unlike some non-native models, these are not undertaken with the agreement of the original issuer. This breaks the link between issuers and investors, and does so in a way that can create counterparty risks or lead to regulatory arbitrage (for example, allowing effective public trading of private companies). The regulators will allow non-natively issued tokenised securities of this type, but they will be subject to the existing rules (e.g., the Public Offers and Admissions to Trading Regulations 2024) and will be treated like equivalent structures, such as contracts for differences and depositary receipts.
• Client protection and best execution: Best execution under MIFID is just as relevant in tokenised markets as it is in traditional securities markets. Intermediaries must act in the interest of their clients. Best execution may need to account for differences in price across different chains.
• Responsibility for recording ownership and settlement finality: A legally accountable person must be responsible for maintaining a clear record of ownership and ensuring settlement finality. For securities within scope of the UK Central Securities Depositary Regulation (e.g., bonds, equities and ETF units), settlement must occur on a central securities depositary ("CSD") or, for on-chain settlement, a digital securities depository ("DSD"). The regulators acknowledge that how settlement finality is achieved may vary. While CSDs are required to be designated under the settlement finality regime, for DSDs and non-systemic activity, the responsible person may contractually specify the point at which transactions are considered final.
• Minimising liquidity fragmentation: A lack of technological, legal or economic interoperability can lead to liquidity fragmentation, both between tokenised and non-tokenised securities, between different tokenised versions of the same security, and between UK and international infrastructure. This could significantly limit the benefits of tokenisation in capital markets or indeed pose risks which the regulators will seek to mitigate.
• Technology neutrality: Regulatory treatment should be dictated by risks and mitigants associated with the underlying activity and/or product in the securities market, not the specific ledger technology used. The authorities are open to outcomes being achieved using a range of technologies, including public chains where privacy standards are maintained.
• Anchoring in central bank money: Wholesale settlement should remain anchored in central bank money as the ultimate risk-free asset in sterling.

What are the Key Priority Areas and the Proposed Roadmap of Initiatives?

• Digital securities settlement: The regulators have committed to setting out the future settlement regime, including which activities and instruments should be required to settle in CSDs. Specific consultation timelines for rules changes are expected in 2027. The regulators will also consult with HM Treasury on whether to extend, further modify or replace the digital securities regulatory sandbox in which DSDs currently operate or make changes to the wider UK CSDR framework.
• Prudential treatment of tokenised securities: The PRA will consult on the final prudential treatment of cryptoassets (including tokenised securities) for PRA-regulated banks and insurers following the completion of the Basel Committee's current targeted review. In the interim, the May 2026 Dear CEO letter confirms that tokenised securities would, in general, receive the same prudential treatment as their non-tokenised equivalents where the legal rights conferred are identical and the underlying risks are comparable.
• Tokenised collateral in central bank operations: The BoE will consider the eligibility of tokenised assets as collateral in BoE lending (e.g., short/long term repo, etc.). In 2027, the BoE is expected to upgrade its securities and collateral management system to enable the capability to connect directly to tokenised asset ledgers (see further below on regulatory settlement initiatives).
• Tokenised collateral for central clearing at CCPs: On the eligibility of tokenised collateral with CCPs, the BoE will set out its policy considerations for discussion in Q3/Q4 2026 on how tokenised collateral assets that are already acceptable as collateral by CCPs could be eligible under UK margining rules (EMIR).
• Access to innovative central bank money settlement: The regulators' goal is for digital assets to be able to access programmable settlement in central bank money. The BoE will deliver a synchronization service enabling settlement of new digital asset ledgers in sterling central bank money via RTGS (the BoE's infrastructure for settlement of Sterling payments in UK payment and securities settlement systems). Delivery is targeted for 2028—the detail on the design, regulatory and assurance requirements is expected to be shared in Q1/Q2 2027. The BoE issued a consultation paper on extending RTGS and CHAPs settlement hours towards 24x7 settlement in May 2026.
• Specified investment cryptoasset custody: The FCA confirms in this paper that it has reversed the decision taken in its consultation in January 2026 to apply its new safeguarding and custody rules for qualifying cryptoassets (known as CASS 17 in the FCA Handbook) to specified investment cryptoassets (“SICs”). SICs are tokenised assets which already qualify as regulated financial instruments under the existing regulatory framework under FSMA and/or MIFID (e.g., transferable securities such as digital bonds and digital equity securities). The FCA will continue to apply the existing CASS 6 framework which applies to traditional securities to SICs. Industry feedback demonstrated that a mixed-custody model for tokenised and non-tokenised securities could affect fungibility of this asset class for the purposes of exchange, trading and collateral management. Tokenised assets which are "qualifying cryptoassets" and which are not SICs will be subject to the new CASS 17 rules to be finalised this year.

What Feedback Have the Regulators Requested from the Market?

Key points on which the regulators have asked for input include:

• Views on the proposed regulatory principles set out in the paper;
• Agreement on whether the priority areas identified are the most important to market participants;
• How safeguarding of SICs should be designed to deliver client asset protection, interoperability, and clear accountability, considering the different types of SIC (digitally native SICs vs. tokenised SICs);
• Agreement on the roadmap of regulatory initiatives set out by the regulators; and
• Whether regulation is preventing market participants from offering tokenised securities in or from the United Kingdom.