This post was originally published on fca.org.uk
What happens next
Looking ahead, the FCA will continue to play our full part in a systemwide approach.
Our upcoming joint tokenisation roadmap with the Bank of England will set out a more comprehensive route from today’s testing environments, to tomorrow’s established market infrastructure.
But while we need to rebalance risk appropriately to stay innovative and competitive, we cannot do so at the expense of investor protections or market integrity.
And although tokenisation changes how assets can be held and transferred, it can’t be allowed to leave ambiguity about ownership.
That is why, following feedback, we intend to consult on safeguarding rules for relevant tokenised investment assets.
We also know that listed companies are asking what this new world means for investor engagement and stewardship, and we are engaging with the Confederation of British Industry and their members.
Even more so as tokenisation and decentralised finance accelerate the emergence of continuous, potentially even 24/7, markets.
With traditional regulated exchanges offering traditional or new contracts that may include micro contracts, digital versions of native derivatives offered by on-chain platforms, and tokenised versions of securities and derivatives, we see the rise of parallel market structures that operate alongside traditional markets.
How these markets interact with each other in a continuous trading environment, is a key question.
We need to understand the implications for liquidity, price discovery, market fragmentation, market resilience, and regulatory oversight.
For equity markets in particular, this raises important questions as to how market disclosures may work in a more continuously traded environment.
How public companies will be able to understand their investor base and the dynamics affecting it, what the implications may be for closed periods, and how market abuse can be monitored.
We are already exploring agentic AI as our ‘first responder’ to speed up how we monitor wholesale markets, overseeing more than 9000 firms.
Harnessing technology and our large data sets – a billion rows of data per day – alongside our supervisory judgement to tackle market abuse faster.
More broadly, interoperability will be critical through this transition.
We must avoid creating unnecessary fragmentation across technologies, settlement systems and jurisdictions.
We also have to face into a world where traditional exchanges sit alongside on-chain and decentralised platforms with highly diffuse operating structures.
The registered entity, protocol governance, validators, sequencers, developers, and front-end interfaces may each be located in different jurisdictions.
This makes it much more challenging to determine where critical market functions are actually performed, and which regulator has responsibility for them, if any.
We are ready to consider how we flex our regulatory regimes to ensure they are digitally fit. And to lead reforms of major global markets.
Just this month, we sought views on gold tokenisation.
Something it feels ironic to be talking about, above the basement vault that stood in for Fort Knox in the Bond film Goldfinger!
Unlike Mr Goldfinger, we’re not looking to corner the gold market. But we do share his interest in the logistics…
We want to understand whether, and under what conditions, tokenisation could improve the way gold is traded, mobilised, pledged and held, while maintaining high standards of market integrity.
We recognise that there are important policy questions to answer – on regulatory classification, investors’ rights, custody and redemption, and what are appropriate consumer protections.
But it has never been our job to pick winners or pre-determine outcomes.
Markets develop through experimentation and healthy competition. Our aim is a dynamic, competitive market that accommodates different business models.
A market where both established and digital-native firms can innovate, compete and interact on a level playing field…
… held to consistent expectations on market integrity, resilience and consumer protection.