The two regulators released a "Call for Input" on May 18, asking financial institutions, technology firms, and market participants to respond to a shared framework covering three areas: the prudential treatment of tokenized assets, tokenised collateral frameworks under UK EMIR rules, and the settlement instruments, including digital cash, stablecoins, and tokenized deposits, that would underpin the system.

The consultation is not a theoretical exercise. Sixteen firms are already conducting live issuance and settlement of tokenized assets inside the Digital Securities Sandbox (DSS), which also hosts the DIGIT pilot, the first real-world DLT-based government debt instrument in the UK, testing the issuance and settlement of UK government gilts on a distributed ledger.

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What the Consultation Covers

Tokenization refers to representing ownership of a real-world asset, such as a bond, fund unit, or invoice, as a digital token on a blockchain or similar ledger. The technology allows assets to move faster, settle with fewer intermediaries, and be used as collateral in ways that traditional paper-based or legacy digital systems do not easily permit.

The BoE and FCA are moving on several fronts simultaneously. The Bank is consulting on extending its Real-Time Gross Settlement (RTGS) system and CHAPS, the UK's high-value same-day sterling payment system, toward near 24/7 operations, which would allow tokenized assets to settle against central bank money around the clock rather than within fixed banking hours.

A separate "Synchronisation Lab" pilot, launched in spring 2026 and running for approximately six months, is testing direct connections between the BoE's next-generation RTGS core ledger and external digital asset platforms.

The UK has also set a T+1 settlement target by October 2027, aligning with the European Union's own timeline.

On stablecoins, a full regulatory framework for systemic stablecoins is expected by end of 2026. Draft proposals include backing requirements of 60 percent short-term UK gilts and 40 percent Bank of England deposits, along with temporary holding limits of £20,000 for individuals and £10 million for businesses.

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From Pilots to Production

FCA Executive Director of Markets Simon Walls described the technology's potential in direct terms: "Tokenisation has the potential to transform wholesale markets, reshaping how assets are issued, traded and settled."

Bank of England Deputy Governor Sarah Breeden framed the moment as one for coordinated action: "The task now is for public and private sectors together to build on these strong foundations, moving from pilots to production."

Sasha Mills, BoE Executive Director for Financial Market Infrastructure, called 2026 "fundamental in shaping the UK's digital financial future," describing an opportunity to "build truly holistic digital financial markets."

The consultation follows a run of concrete deployments. Aberdeen Investments, working with the Archax platform and using the Hedera network, launched tokenized money market funds that Lloyds Banking Group used in live FX collateral swaps.

The deployment indicated that tokenized fund units can function as collateral in real transactions, not just in test environments, pointing toward a broader shift in how collateral is managed across wholesale markets.

The global market for tokenized real-world assets (excluding stablecoins) has grown roughly tenfold over three years, reaching an estimated $19 billion to $36 billion in early 2026, depending on the data source. Six asset categories have each individually crossed $1 billion in on-chain value: private credit, commodities, US Treasuries, corporate bonds, non-US government debt, and institutional alternative funds.

Projections from BCG and Ripple place the total global tokenized real-world asset market at $18.9 trillion by 2033.

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Why This Matters Outside London

For institutional counterparties in South Asia, Sub-Saharan Africa, and Southeast Asia, the UK consultation is not a distant regulatory update.

London's wholesale infrastructure, including its clearing houses and settlement systems, serves as a counterparty backbone for a substantial portion of cross-border capital flows in those regions, according to analysts tracking international capital market linkages.

India's Reserve Bank has been running a parallel track. Its Unified Markets Interface (UMI) is designed to tokenize corporate bonds, T-bills, and derivatives using wholesale central bank digital currency (CBDC) infrastructure. India's securities regulator SEBI has separately mandated the use of distributed ledger technology for security and covenant monitoring of non-convertible securities, a concrete regulatory action that signals the depth of India's institutional commitment to the technology.

A deposit tokenization pilot conducted in October 2025 returned what the RBI described as encouraging early results.

The BoE's emerging standards on prudential treatment and collateral rules are frameworks Indian regulators are watching directly, given the volume of India-UK capital flows.

In Africa, the stakes are more immediate. Sub-Saharan Africa received $205 billion in on-chain value in the twelve months to June 2025, a 52 percent year-on-year increase. A $331 billion SME financing gap identified by the Brookings Institution points to the region's unmet demand for accessible credit infrastructure.

Tokenized invoice finance and on-chain trade credit products require investable-grade settlement standards before international capital will commit. The UK consultation aims to create exactly those standards.

Kenya signed its VASP Bill into law in October 2025. Nigeria's Investments and Securities Act 2025 classified digital assets as securities. South Africa has operated a licensed crypto asset framework since 2023. Many institutions across those jurisdictions clear and settle through London, meaning the UK's emerging framework will directly shape their operational environment.

In Southeast Asia, Singapore's Project Guardian has drawn more than 40 institutions into live tokenization pilots across asset classes. Indonesia projects its domestic tokenized asset market could reach $88 billion by 2030. Across the Asia-Pacific region, approximately 24 percent of adults have adopted digital assets, making it one of the most active zones globally for integrating the technology into institutional finance.

John Salmon, a partner at Hogan Lovells who advises on digital assets, put it plainly: "All our clients are looking at this." He added that the UK's forthcoming regime would likely surpass MiCA, the European Union's crypto regulation, in quality, and would probably be finalized before the US framework is in place.

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What Comes Next

Responses to the consultation are due by July 3, 2026, with a feedback statement expected before the end of summer.

The regulatory framework for systemic stablecoins is expected to be finalized separately by year-end.

For developers building collateral management tools, settlement layers, or payment rails serving London-connected corridors, the outcomes of this consultation will define what qualifying collateral looks like on-chain. Among the specific areas under development are smart contract standards for collateral under UK EMIR. The proposed stablecoin backing requirements, with 60 percent held in short-term UK gilts and 40 percent in Bank of England deposits, also create a reserve composition model that differs materially from frameworks emerging in the United States and European Union, with direct implications for any product designed to operate across multiple jurisdictions.