Bank of England Consults on Rules for Tokenized Collateral in Central Clearing

The Bank of England published a consultation paper on Oct. 29 proposing supervisory expectations for central counterparties (CCPs) seeking to accept tokenized versions of eligible collateral ¹. The move forms part of the central bank's effort to advance the United Kingdom's wholesale digital financial markets strategy while maintaining financial stability standards ¹.

According to the central bank, existing regulatory frameworks do not prohibit CCPs from accepting tokenized collateral, provided the instruments satisfy established risk and clearing criteria ¹. Eligible tokenized collateral must remain capable of being valued, transferred, and liquidated when required, including during periods of market stress ¹. The regulator highlighted that tokenization could allow firms to mobilize collateral faster and manage margin calls more efficiently across different jurisdictions ¹.

Under the proposed supervisory statement, the Bank of England plans to evaluate tokenized collateral proposals using the principle of "same risk, same regulatory outcome" ¹. Sarah Breeden, Deputy Governor for Financial Stability, said the consultation delivers on the central bank's secondary objective to support innovation in financial market infrastructure while preserving systemic stability ¹. Breeden characterized the consultation as part of a joint agenda between industry and UK authorities to facilitate the responsible adoption of tokenization across financial markets ¹.

The central bank noted that the consultation contributes to broader initiatives coordinated alongside the Financial Conduct Authority (FCA) and HM Treasury ¹. The consultation period remains open for public and industry feedback until Feb. 12, 2027 ¹.