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Joint report with Oliver Wyman highlights three ways the UK can become a leader in securities tokenisation
UK Finance today releases a new report which sets out three key missions to accelerate the digital transformation of the UK’s capital markets.
The report ‘Unlocking the power of securities tokenisation’, produced in conjunction with Oliver Wyman, looks at how securities tokenisation (the digital representation of real financial assets) will transform capital markets and international banking infrastructure.
The tokenisation of securities could improve the financial system’s operational efficiencies. However, these benefits have yet to be realised at scale as the markets, globally and in the UK, are in their infancy. Currently, tokenised issuances are still a fraction of traditional securities issuance.
Key findings
Based on work undertaken with the largest banks, financial market participants, investors government, regulators and other trade bodies, alongside detailed research on global innovations to date, the report finds:
Three key missions
The report lays out three key areas that the UK needs to focus on to become a leader in securities tokenisation:
Mission One: Enable innovation and experimentation, underpinned by legal and regulatory certainty
Legal and regulatory certainty is essential. We commend the strong work undertaken by the Law Commission in its recent Digital Assets report and by the UK Jurisdiction Taskforce, as well as by the Law Society. Momentum should be maintained to make the necessary regulatory and statutory refinements to drive certainty and confidence in the UK. In addition, industry participants need space to innovate around securities tokenisation and a place to experiment is required to do this. A highlight of key recommendations include:
Mission Two: Foster a flourishing UK digital market by promoting interoperability and safe innovation at-scale
For the UK to achieve this mission, there needs to be market liquidity and a scaled-up, connected market for tokenised securities. Recommendations to achieve this include:
Mission Three: Become a leader in global standards for the tokenised securities market
The UK needs to play an active role in facilitating the establishment of supranational standards that will enable interoperability of distributed technology networks as they evolve. These standards are still in the early stages. There is an opportunity for the UK to establish itself as a leader by convening different jurisdictions to agree the path forward, and sponsoring initiatives to drive convergence. As part of this, the UK should collaborate with other jurisdictions such as Singapore or the EU and connect to their pilots or sandboxes to align international initiatives and form the basis of cross-border tokenisation ecosystem.
The full list of recommendations can be found in Chapter 3 of the report.
Bob Wigley, Chair of UK Finance, said:
Securities tokenisation is likely to transform financial markets, through delivering lower costs, lower risks, and wider market access. But without continued bold action the UK risks falling behind other jurisdictions. "In today’s new report, we worked with a wide range of market participants, the government, and regulators to outline the benefits of securities tokenisation and highlight the challenges the UK needs to overcome. "The opportunities that tokenisation presents are substantial and given the UK is a leading global financial centre, we need to be at the forefront of developments.
Securities tokenisation is likely to transform financial markets, through delivering lower costs, lower risks, and wider market access. But without continued bold action the UK risks falling behind other jurisdictions.
"In today’s new report, we worked with a wide range of market participants, the government, and regulators to outline the benefits of securities tokenisation and highlight the challenges the UK needs to overcome.
"The opportunities that tokenisation presents are substantial and given the UK is a leading global financial centre, we need to be at the forefront of developments.
Lisa Quest, Head of UK & Ireland, and Co-Head of the Public Sector and Policy Practice, Europe, Oliver Wyman, said:
Tokenisation has the potential to shift the way assets are managed and leveraged in a transformative way. "This report marks an exciting milestone for government and industry to unlock that opportunity. "It highlights some key actions that can promote innovation and the eventual interoperability of solutions, while also ensuring that the UK’s markets remain highly competitive and underpinned by the technology that will power markets of the future.
Tokenisation has the potential to shift the way assets are managed and leveraged in a transformative way.
"This report marks an exciting milestone for government and industry to unlock that opportunity.
"It highlights some key actions that can promote innovation and the eventual interoperability of solutions, while also ensuring that the UK’s markets remain highly competitive and underpinned by the technology that will power markets of the future.
Ends
The full report can be found here with the full list of recommendations in Chapter 3.
For more information, please call the UK Finance press office on 020 7416 6750 or email press@ukfinance.org.uk
UK Finance is the collective voice for the banking and finance industry. Representing more than 300 firms across the industry, we act to enhance competitiveness, support customers, and facilitate innovation.
06.07.23
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