06 July 2023

FT: Wigley - The UK needs to lead in securities tokenisation

Disruptive innovation can take time to gain a hold but we have finally reached an inflection point with the tokenisation of securities. Over the past year, I have seen an upsurge in financial services institutional interest in this area, particularly as central banks move from analogue towards digital. Without continued bold action, however, the UK risks falling behind other jurisdictions.

Tokenisation is not about crypto. What we are talking about is creating digital representations of real financial assets with ownership tracked on distributed ledgers, or blockchains. This is for everything from equities to bonds to illiquid assets like real estate and private equity. In a new report, jointly prepared by UK Finance and Oliver Wyman, we worked with dozens of the largest banks, financial market participants, regulators, ministers and other bodies to outline the benefits of securities tokenisation and understand the bottlenecks that the UK needs to address.

The UK’s standing as an equity listings venue gains press coverage, but fixed income and post-trade infrastructure are just as important to London’s position as a global financial centre. And the pain points around the cost and complexity of current capital markets infrastructure are real and significant. The good news for the UK is that tokenisation globally is in its infancy. Even digital bond issuance — the most common usage for tokenisation in mainstream financial assets — is still tiny, totalling about $1.5bn in the year to February, according to S&P Global. But the reality is that the UK is at risk of falling behind other financial centres, as digital bond issuance to date has been in other places such as Singapore or Switzerland.

Despite its reputation for red tape and bureaucracy, the EU has moved ahead in terms of experimentation....

more at FT

© FT plc