UK banks are clamouring for a national platform for tokenised securities

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By Matthew Griffin Connected Society 23rd July 2023

WHY THIS MATTERS IN BRIEF

Tokenisation is an odd technology, but it will open the door to new asset classes and markets worth over $100 Trillion.

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This week UK Finance, the banking and financial services industry body, called for government action to support the UK in adopting tokenized securities. Currently the UK is behind other countries regarding tokenization, but together with Oliver Wyman it published a report outlining a path for the UK to become a leader.

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“Securities tokenisation is likely to transform financial markets, through delivering lower costs, lower risks, and wider market access,” said Bob Wigley, Chair of UK Finance. “But without continued bold action the UK risks falling behind other jurisdictions.”

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The industry body called for the government to issue bonds using blockchain, following the likes of the Hong Kong Monetary Authority, and the European Investment Bank (EIB), which has issued four digital bonds.

Additionally, there’s a request for the Treasury to explore whether there’s “industry appetite for a shared, national infrastructure for tokenized securities.”

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While the EU’s DLT Pilot Regime is now live, the UK’s FMI Sandbox is not yet out of the starting gates. UK Finance asked His Majesty’s Treasury (HMT) to roll out the sandbox urgently as the number one priority. It’s keen for a roadmap for what happens when the sandbox ends, as there’s a risk that the efforts could be wasted. It also wants to see connectivity between other jurisdictions and the UK Sandbox.

UK Finance has called for flexibility regarding the Central Securities Depository Regulation (CSDR). The EU’s DLT Pilot Regime relaxes legislation allowing a single entity to operate both a trading platform and a central securities depository (CSD). That’s because a distributed ledger often covers most of a CSD’s functions in recording asset ownership and settlement.

However, despite the EU rolling out its Pilot Regime, three months after the legislation went live, there’s been little activity. One of the challenges is the limits on transaction volumes for digital securities, which resulted in the bigger players choosing to comply with existing legislation instead.

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“The opportunities that tokenisation presents are substantial and given the UK is a leading global financial centre, we need to be at the forefront of development,” added Wigley.

Matthew Griffin / About Author

Matthew Griffin, described as “The Adviser behind the Advisers” and a “Young Kurzweil,” is the founder and CEO of the World Futures Forum and the 311 Institute, a global Futures and Deep Futures consultancy working across the next 50 years, and is an award winning futurist, and author of “Codex of the Future” series.

Regularly featured in the global media, including AP, BBC, Bloomberg, CNBC, Discovery, RT, Viacom, and WIRED, Matthew’s ability to identify, track, and explain the impacts of hundreds of revolutionary emerging technologies on global culture, industry and society, is unparalleled. Recognised for the past six years as one of the world’s foremost futurists, innovation and strategy experts Matthew is an international speaker who helps governments, investors, multi-nationals and regulators around the world envision, build and lead an inclusive, sustainable future.

A rare talent Matthew’s recent work includes mentoring Lunar XPrize teams, re-envisioning global education and training with the G20, and helping the world’s largest organisations envision and ideate the future of their products and services, industries, and countries.

Matthew's clients include three Prime Ministers and several governments, including the G7, Accenture, Aon, Bain & Co, BCG, Credit Suisse, Dell EMC, Dentons, Deloitte, E&Y, GEMS, Huawei, JPMorgan Chase, KPMG, Lego, McKinsey, PWC, Qualcomm, SAP, Samsung, Sopra Steria, T-Mobile, and many more.