The Bank of England has launched a consultation supporting central counterparties to accept tokenised forms of eligible collateral. The bank said tokenisation could allow quicker and more efficient mobilisation and management of collateral, including across jurisdictions, helping firms respond more effectively to margin calls and supporting innovation in central clearing as part of the UK’s wholesale digital financial markets strategy.
The regulatory position is permissive with conditions. The bank considers its existing framework is not a barrier to CCPs accepting tokenised collateral, provided the collateral meets the standards required in central clearing: tokenised collateral must remain capable of being valued, transferred and realised when needed, including in stressed conditions. A proposed supervisory statement sets out how the bank would assess applications, on the principle of same risk, same regulatory outcome, while allowing different arrangements to reach those outcomes in different ways.
Deputy Governor for Financial Stability Sarah Breeden said the consultation delivers the bank’s secondary objective for innovation in financial market infrastructure while maintaining financial stability, as part of a broader agenda with the FCA, HM Treasury and industry on tokenisation in wholesale markets.
The consultation closes on February 12, 2027. For the rates market the significance is operational rather than immediate: cleared derivatives and repo run on collateral mobility, and the episodes that move gilt and swap markets violently, such as margin spirals, are collateral episodes. A framework that lets eligible collateral move in tokenised form, if it survives the stress conditions the bank names, changes how fast that plumbing can clear.