The Bank of England and the Financial Conduct Authority have signaled a shift in how the UK treats tokenized markets. On September 14, the two regulators published Feedback Statement FS26/1, summarizing 123 responses to their May Call for Input. Respondents pushed for a decisive move “from sandboxes and pilots and towards full production, scale and permanence.” Notably, the regulators accepted that demand outright. They now plan to publish a joint UK tokenization roadmap later in 2026, complete with target dates for each workstream.
Hedera responded to the @TheFCA & @bankofengland Call for Input on UK wholesale markets.
— Hedera (@hedera) September 14, 2026
Regulatory clarity isn't enough.
Interoperability. Governance. Auditability.
Trust lives at the infra layer.
🔗 https://t.co/PXP25GMPuJ pic.twitter.com/NNDmink8NT
Who Responded
The respondent list reads like a map of institutional finance and crypto infrastructure. Additionally, it shows how far the two worlds have converged on this topic.
- Asset managers and banks: BlackRock, Schroders, Royal London Asset Management, BNY, HSBC, Banco Santander, Standard Chartered, NatWest, and Lloyds Banking Group.
- Market infrastructure: Euroclear, Nasdaq, Intercontinental Exchange, Tradeweb, Computershare, Broadridge, and the London Metal Exchange Group.
- Blockchain networks and protocols: Hedera, Chainlink, Ripple, Ava Labs, the Stellar Development Foundation, the Midnight Foundation, and Digital Asset Holdings on behalf of Canton.
- Crypto firms: Coinbase, Robinhood, Tether, Bitpanda, Fireblocks, Chainalysis, and Solidus Labs.
- Industry bodies: UK Finance, ISDA, ICMA, AFME, the Investment Association, the World Federation of Exchanges, and the World Gold Council.
Several legal academics also submitted views. As a result, the feedback covers everything from smart contract risk to insolvency law.
The Core Demand: Permanence Over Pilots
Respondents delivered one consistent message. Temporary regimes discourage investment. Firms told regulators that “a lack of permanence in the regulatory regime was discouraging investment” in tokenized infrastructure. The most common example involved the Digital Securities Sandbox (DSS). Firms want a long-term settlement model that outlasts the sandbox. Similarly, they argued that a single Digital Gilt Instrument (DIGIT) issuance cannot support a functioning secondary market. Recurring issuances would need to follow.
The regulators responded with specifics rather than platitudes. First, they noted that the DSS already permits scalable live activity, unlike most sandboxes worldwide. HSBC has received permission to run notary, account maintenance, and settlement functions inside the DSS. Second, they committed to a “clear pathway” for DSS participants to reach permanent authorization. Third, they confirmed that HM Treasury now intends to prepare for further DIGIT issuances if the first succeeds. That first transaction will run on HSBC Orion in Q1 2027, with a bilateral link to LSEG’s depository.
Meanwhile, the Bank continues building the plumbing beneath all of this. It is developing a synchronization service so tokenized asset transactions can settle in central bank money, targeting 2028. It is also consulting on extending RTGS and CHAPS settlement hours toward near 24/7 operation.
Collateral Is the Use Case That Matters
The feedback cuts against a common tokenization narrative. Respondents rarely mentioned 24/7 trading or atomic settlement as standalone benefits. Instead, they focused overwhelmingly on collateral. Faster collateral movement lets firms deploy assets more efficiently. For context, the regulators cited a US report finding that market participants hold an average of 7% excess collateral as a buffer. Tokenization could shrink that buffer.
Buy-side firms frequently raised tokenized money market funds (tMMFs). Posting a tMMF as collateral avoids forced liquidation during stress, which reduces pro-cyclical selling. The regulators agreed that collateral mobility offers the main short-to-medium-term benefit. Consequently, they will consider whether tokenized assets, including stablecoins, qualify as collateral in the Bank’s Sterling Monetary Framework operations. The Bank will also publish a supervisory statement and discussion paper later this year on tokenized collateral at central counterparties.
Prudential Treatment and the Basel Problem
The Prudential Regulation Authority issued a Dear CEO letter in May. It stated that tokenized traditional assets should receive the same capital treatment as their non-tokenized equivalents “where legal rights are identical and underlying risks are comparable.” However, respondents flagged a catch. The letter defers to Basel Committee requirements. Those requirements arguably treat certain tokenized assets like unbacked cryptoassets for prudential purposes. As a result, firms said they would default to the more cautious approach. The regulators promised further clarity but told firms to keep applying the existing framework for now.
Stablecoins, Settlement Finality, and Custody
Several respondents asked to use stablecoins as settlement assets, starting inside the DSS. The regulators confirmed this is now permitted, subject to conditions and Treasury amendments. Additionally, respondents pushed for statutory settlement finality rather than contractual finality. Only statutory finality protects against third-party claims in insolvency. Without it, securities pending settlement cannot be rehypothecated, lent, or posted as margin.
On custody, most respondents favored applying CASS 6, the traditional safe custody rules, to tokenized securities. They asked for targeted overlays covering private key management and other blockchain-specific risks. The FCA will consult on these safeguarding rules in the first half of 2027. Until then, firms face assessment under CASS 6.
Where Regulators Drew a Line
The regulators held firm on DeFi. Every regulated activity must have an accountable, regulated person behind it. Some respondents argued this makes DeFi tools impractical and undermines technology neutrality. The FCA and Bank disagreed. They compared DeFi software providers to cloud providers, which support regulated firms without replacing them. Importantly, they cited recent incidents involving bridges, oracles, key management, and cross-chain messaging as evidence of operational risk. For government bonds and equities, they stated plainly that solutions offering no recourse for lost or stolen assets will not pass.
What Comes Next
The roadmap arrives later this year with dates and dependencies for each workstream. Interoperability will feature prominently, though regulators want industry to set technical standards. They will coordinate internationally through IOSCO, CPMI, Project Guardian, and the UK-US Transatlantic Taskforce. Separately, the FCA opened a Call for Input on tokenized gold, prompted by respondents citing London’s spot gold market. Responses close October 23, 2026.
The UK has spent two years building a sandbox. Now the industry has told regulators it wants the exit door. The regulators, for their part, appear ready to open it.
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