FCA to Consult on Safeguarding Rules for Tokenised Investment Assets

Financial Conduct Authority chief executive Nikhil Rathi said that, following industry feedback, the regulator intends to consult on safeguarding rules for relevant tokenised investment assets, telling his audience that tokenisation cannot be allowed to leave ambiguity about ownership. In a speech published by the FCA on 23 September 2026 and delivered on 22 September 2026 at TheCityUK dinner, sponsored by Nasdaq, Rathi said an upcoming joint tokenisation roadmap with the Bank of England will set out a route from today’s testing environments to tomorrow’s established market infrastructure. The FCA noted the published text is a drafted speech and may differ from the delivered version.

Rathi said the UK must move from experimentation to adoption so that tokenisation and other emerging technologies can scale safely in wholesale markets, supported by regulation that is agile while maintaining market integrity, resilience and investor protection. He described the UK as the second-largest global financial centre, with sophisticated markets, trusted institutions and a strong legal system, but warned that international competition is accelerating as exchanges, banks, investors, fintechs and policymakers invest heavily in the next generation of market infrastructure. He cited estimates putting the potential benefit of tokenisation at around £33 billion to UK GDP and £14 billion in tax revenues annually, and said the European Central Bank had launched wholesale digital payments in the week of the speech.

The speech listed recent FCA measures: an April 2026 policy statement on fund tokenisation, authorisation of the UK’s first fully native tokenised fund in June 2026, finalisation of the stablecoin regime before the summer, and progress on digital gilt issuance and on using stablecoins as settlement assets.

Rathi noted that HSBC Orion has become the first entrant approved to provide live Digital Securities Depository services. According to HM Treasury’s update on the Digital Gilt Instrument (DIGIT) pilot, published on 16 July 2026, HSBC received Gate 2 approval in the Digital Securities Sandbox on 13 July 2026, after its appointment as platform provider through a competitive procurement in February 2026. HM Treasury said the first DIGIT transaction will take place by the first quarter of 2027 on HSBC Orion, that HSBC and London Stock Exchange Group (LS4C.DE ) have signed a memorandum of understanding to deliver a bilateral Digital Securities Depository link, and that the government expects to list DIGIT on the London Stock Exchange main market as part of the pilot. The Chancellor had announced on 14 July 2026 that the government is taking steps to prepare for potential further DIGIT issuances, subject to the success of the first transaction.

Industry Feedback on Tokenisation

Earlier in 2026, the FCA and the Bank of England jointly asked industry for views on the future of tokenisation in UK wholesale financial markets, setting a response deadline of 3 July 2026. Rathi said the call for input drew more than 120 responses from different parts of the market. Recurring themes included opportunities in post-trade, particularly making collateral move more efficiently; potential obstacles around settlement, prudential treatment and interoperability, which also require work on insolvency and cross-border conflict of laws; and, in what he described as the clearest message, a need for speed, with some firms reporting ‘pilot fatigue’. Firms, he said, want to move on from experimentation and sandboxes towards full production and permanence.

Views were split on where accountability should rest when decentralised finance protocols are used, on whether exposure tokens should be treated as derivatives in line with their legal structure or be required to settle in a central or digital securities depository, and on calls for far-reaching legislation, including a Digital Property Act or regular digital gilt issuance. Respondents wanted central securities depositories and other financial market infrastructure to move assets on chain faster, with forbearance from the authorities if necessary, and Rathi said tax and accounting treatment will need proper examination. He named Chris Woolard, the UK’s Digital Markets Champion, as playing an important role in coordinating the sector to drive adoption.

The joint paper recorded that 16 entrants had passed Gate 1 of the Digital Securities Sandbox, with activity set at between £8 billion and £13 billion for gilts and between £17 billion and £28 billion for sterling corporate bonds in aggregate. It confirmed that tokenised traditional assets should generally receive the same prudential treatment as their non-tokenised equivalents for PRA-regulated banks, building societies and designated investment firms where legal rights are identical and underlying risks comparable. It also stated that the Bank of England is targeting 2028 for a synchronisation service to settle new digital asset ledgers in sterling central bank money, and that CHAPS will open from 1.30am from September 2027. The FCA said in the paper that it is not taking forward its proposal to apply CASS 17 safeguarding rules to specified investment cryptoasset (SIC) custody at this stage, and the authorities committed to a finalised cross-authority roadmap by the end of 2026, with rule changes to be consulted on mostly in 2027.

Continuous Markets and Supervision

Rathi said tokenisation and decentralised finance are accelerating the emergence of continuous, potentially 24/7, markets, with parallel market structures operating alongside traditional ones. How these markets interact, he said, raises questions for liquidity, price discovery, market fragmentation, market resilience and regulatory oversight. For equity markets, he pointed to how disclosures may work in a continuously traded environment, how public companies will understand their investor base, what the implications may be for closed periods, and how market abuse can be monitored. He added that the FCA is engaging with the Confederation of British Industry and its members on what the changes mean for investor engagement and stewardship.

The FCA is exploring agentic AI as a ‘first responder’ to speed up how it monitors wholesale markets, Rathi said, overseeing more than 9,000 firms and drawing on a billion rows of data per day alongside supervisory judgement. He said interoperability will be critical through the transition, and that diffuse on-chain operating structures, in which the registered entity, protocol governance, validators, sequencers, developers and front-end interfaces may each sit in different jurisdictions, make it much harder to determine where critical market functions are performed and which regulator has responsibility for them, if any.

The FCA also sought views on gold tokenisation in September 2026. Rathi said the regulator wants to understand whether, and under what conditions, tokenisation could improve the way gold is traded, mobilised, pledged and held, while maintaining high standards of market integrity, with policy questions covering regulatory classification, investors’ rights, custody and redemption, and appropriate consumer protections.