The Bank of England and the Financial Conduct Authority (FCA) have issued a joint statement on tokenization and the wholesale market. The comment is described as a “shared vision” that has the potential to streamline markets while benefitting from additional functionality. The discussion is driven partly due to requests from the financial services sector as participants require greater certainty to pursue the innovation.
A list of principles for a long-term vision has been published “to give industry the clarity it needs to engage, invest and innovate with confidence.” The two agencies have issued a call for input from industry participants and interested parties. A feedback statement is anticipated to be published this summer.
Simon Walls, executive director of markets at the FCA, said that tokenization has the potential to reshape how assets are issued, traded, and settled, and to transform wholesale markets. Walls said the FCA aims to support firms adopting the technology, which has the potential to reduce risk and lower costs while providing new services.
Sarah Breeden, deputy governor for financial stability at the Bank of England, explained that the two agencies have done quite a bit to enable the adoption of tokenization in retail and wholesale finance, and now it is needed for the public and private sectors to build upon the foundations to support financial stability and growth.
The Bank of England has published a consultation on extending RTGS and CHAPS settlement hours, and the next steps towards near 24/7 settlement.
The Prudential Regulation Authority (PRA) has published Dear CEO letters setting out updated guidance on the treatment of tokenized asset exposures and on innovations in deposits, e-money, and stablecoins.
The FCA stated that it is committed to further work to support tokenization in the UK, including considering how its approach to applying client asset (CASS) rules may evolve in light of industry feedback.