Market News

Summary

• Bank of England launches consultation on requirements for central counterparties accepting tokenised collateral.

• Tokenisation could help financial firms meet margin calls faster and improve collateral management.

• Existing regulatory rules can accommodate tokenised collateral, provided it meets established standards.

• Consultation closes on February 12, 2027.

  the UK's central bank+1

LONDON, Oct 29 (Reuters) — The Bank of England said on Thursday it was launching a consultation on the requirements central counterparties need to meet to accept tokenised collateral, which could make it easier for financial firms to meet margin calls and manage collateral.

The central bank said the existing regulatory framework does not prevent central counterparties (CCPs) from accepting tokenised forms of eligible collateral, provided the assets meet the standards required for central clearing.

The proposed supervisory statement aims to provide greater clarity on how the Bank would assess applications from CCPs seeking to accept tokenised collateral.

Tokenisation involves representing assets in digital form using technologies such as distributed ledgers. It could enable faster and more efficient transfers of collateral, improve liquidity management and help firms respond more effectively to margin calls.

However, tokenised assets must remain capable of being valued, transferred and realised when required, including during periods of market stress. Firms must also address risks involving liquidity, custody, cybersecurity, operational resilience and the legal enforceability of ownership rights.

The Bank said its approach would follow the principle of “same risk, same regulatory outcome”, meaning tokenisation would not automatically change an asset's regulatory treatment.

The consultation is part of broader efforts by the Bank, the Financial Conduct Authority and HM Treasury to support responsible innovation in UK wholesale financial markets.

The Bank is inviting responses from clearing houses, market participants, technology providers and other stakeholders. The consultation closes on February 12, 2027.