Advocacy group UK Finance is urging the British government to encourage the tokenization of securities. The market is small now, but the stakes are high in the future, he said.
In a report co-authored with consultancy Oliver Wyman, UK Finance said that the advantages of tokenization, such as lower costs, lower risk and broader access, are not just “a nice thing to have.” Tokenization “can transform the financial system, and the UK should be at the center of this transformation,” he said.
Today we have published our report ‘Unlocking the power of security tokenization’, produced in conjunction with @OliverWyman. Discuss how security tokenization will transform capital markets and international banking infrastructure. https://t.co/HtsPzFwj4y pic.twitter.com/RfyQrNy8Hw
— UK Finance (@UKFtweets) July 6, 2023
UK Finance Chairman and former Bank of England tribunal member Bob Wigley wrote in a Financial Times editorial at the time of the report’s publication:
“The UK risks falling behind other financial centers as digital bond issuance to date has been in other places like Singapore or Switzerland. […] Our progress is similar to that of the US, which could advance rapidly due to its vast financial resources, deep capital markets, and technological know-how.”
“The UK government has given some indication of its commitment to tokenization and its enablers. The industry now requires government action,” the report added. He featured the Singapore Guardian Project as an example of a government exploring collaboration with the private sector to develop the use of tokenized assets.
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The UK already has a growing “fit for purpose” legal base for security tokenization, if it needs adaptation, according to the report. UK Finance suggested a roadmap for the UK to position itself as a leader in the global tokenization market.
The detailed plan had three components: innovation, interoperability, and leadership in global standards, with a five-year horizon. Financial market infrastructure sandboxes, scheduled to be launched this year by the Treasury, played a key role in the plan.
Currently, tokenization is only taking place on a small scale, with 1% of $20.6 trillion of global long-term fixed income instruments tokenized in 2021, according to research cited in the report.
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This post Gaining speed on tokenization is vital for the UK’s financial future, a banking group warns
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