The Bank of England is preparing to embed tokenisation into the core of UK financial infrastructure, with Deputy Governor Sarah Breeden declaring that distributed ledger technology (DLT) could “transform capital markets” by streamlining settlement, reducing costs, and enhancing resilience.
In a keynote speech at Warwick Business School, Breeden outlined a multi-pronged strategy to modernise the financial system, including regulatory reforms, live experimentation, and a push for interoperability across digital money formats. Her remarks mark a decisive shift from exploratory rhetoric to implementation.
“Tokenisation offers the potential for capital markets to operate faster, cheaper and more transparently,” Breeden said. “It could reduce reconciliation costs, shorten settlement times, and improve resilience. That’s why we are actively exploring its use in our Digital Securities Sandbox.”
The sandbox, launched earlier this year, allows firms to test tokenised securities and settlement models using digital forms of money—including stablecoins and tokenised deposits. Breeden confirmed that these instruments will be permitted as the “cash leg” in securities transactions, a move that positions tokenised money as a viable alternative to traditional settlement assets.
“This is not just about innovation for its own sake,” she added. “It’s about ensuring that the financial system remains efficient, competitive and secure in a digital age.”
Breeden also revealed that the bank is revisiting its 2023 proposals for regulating systemic stablecoins. The revised framework will accommodate business models that generate income from backing assets such as short-term government securities—an adjustment aimed at enabling commercially viable stablecoin issuance under robust oversight.
“We want to support innovation while safeguarding financial stability,” she said. “That means designing regulation that is proportionate, risk-sensitive, and future-proof.”
A central theme of the speech was interoperability. Breeden warned that without seamless interaction between different forms of digital money—central bank digital currencies (CBDCs), tokenised commercial bank deposits, and regulated stablecoins—the system risks fragmentation and inefficiency.
“We envisage a multi-money future,” she said. “But that future must be interoperable. Otherwise, we risk creating silos that undermine the very benefits tokenisation promises.”
To accelerate progress, the bank is launching a Digital Pound Lab to foster collaboration between technologists, financial institutions, and regulators. It is also partnering with the BIS Innovation Hub on a DLT Challenge, inviting firms to develop solutions for cross-ledger settlement and programmable money.
“These initiatives are about learning by doing,” Breeden said. “We want to understand what works, what doesn’t, and what needs to change to make tokenised finance safe and scalable.”
