UK regulators put tokenization infrastructure first

UK regulators are treating tokenization infrastructure—rather than issuance alone—as the near-term priority for wholesale markets. In a September 14, 2026 feedback statement, the Financial Conduct Authority (FCA) said most of 123 respondents identified post-trade activity, particularly collateral mobility, as tokenization’s main opportunity (FCA).

The conclusion shifts attention from whether securities can be represented digitally to whether institutions can move, finance, safeguard and settle them within controlled market infrastructure. The FCA and Bank of England plan to publish a joint tokenization roadmap later in 2026 (FCA).

For issuers, investors and infrastructure teams, the practical question is becoming less “Can this asset be tokenized?” and more “Can the entire post-issuance workflow operate reliably and compliantly?”

Why tokenization infrastructure is moving to the centre

Tokenized securities can potentially make ownership records, transfers and settlement more programmable. But those benefits depend on connections to the processes institutions already use: collateral calls, custody, reconciliation, liquidity management, corporate actions and investor protections.

The FCA’s consultation response indicates that market participants see post-trade as the most immediate area for value creation (FCA). In Fundshing’s analysis, that preference reflects a practical constraint. New issuance can be demonstrated in a controlled environment, but adoption depends on whether the resulting instruments can participate in familiar financing and settlement workflows.

The Bank of England and FCA have specifically identified tokenized collateral and settlement instruments as priority infrastructure issues. Their shared vision also says 16 firms are working on live issuance and settlement through the Digital Securities Sandbox (DSS) (Bank of England).

That work does not amount to permanent regulatory authorization or a guarantee that any particular model will scale. It does, however, provide a route for testing how tokenized securities interact with regulated market functions.

What the Digital Securities Sandbox is testing

The DSS is designed to support live testing of digital securities activity, including issuance, trading and settlement. The FCA and Bank of England’s account of the programme places the sandbox within a broader transition from experimentation toward possible permanent market arrangements (Bank of England).

For an issuer, sandbox participation can expose operational questions that a technical proof of concept may miss:

• How are investors onboarded and verified?
• Which party maintains the authoritative ownership record?
• How are transfers restricted when eligibility rules apply?
• What happens when a corporate action, default or disputed transaction occurs?
• How does the instrument connect to existing custodians, venues and payment arrangements?

For investors, the key issue is not simply whether a token changes hands quickly. It is whether ownership, asset servicing, recovery rights and transaction finality are clear under stress.

The legal analysis of the FCA statement highlights the importance of custody safeguards, investor recourse and operational controls where decentralized infrastructure is involved (Regulation Tomorrow). These safeguards are central to institutional confidence, particularly where a tokenized instrument depends on several technology and service providers.

Implications for collateral and settlement workflows

Collateral mobility is a particularly important use case because it connects tokenized assets to liquidity and risk management. If eligible collateral can be identified, transferred and valued with fewer manual handoffs, firms may be able to reduce reconciliation friction and respond more efficiently to margin requirements.

That is a potential workflow benefit, not a guaranteed efficiency gain. It depends on legal enforceability, asset eligibility, valuation processes, settlement finality, interoperability and access to suitable money or payment rails.

The Bank of England and FCA’s shared vision expressly places tokenized collateral and settlement instruments among the infrastructure priorities (Bank of England). The policy direction therefore suggests that future designs will be judged by their ability to support controlled institutional activity, rather than by token issuance in isolation.

Infrastructure teams should map the complete transaction lifecycle: issuance, distribution, trading, settlement, custody, collateral reuse, reconciliation, reporting and retirement. This is closely related to the broader design questions covered in Fundshing’s RWA tokenization and tokenization platform resources.

Compliance requirements will shape product design

A tokenized security may use distributed-ledger technology, but that does not remove the need for governance. Teams still need clear responsibilities for permissions, access control, recordkeeping, incident response, data protection and customer communications.

The FCA-related legal analysis points to future custody safeguards and operational controls around decentralized infrastructure (Regulation Tomorrow). In practice, this means compliance should be part of the architecture from the beginning—not added after a technical demonstration.

Issuers should define who can hold and transfer the asset, which jurisdictions are supported and how restrictions are enforced. Investors should examine the legal nature of the token, the identity of the recordkeeper, custody arrangements and the process for resolving errors or disputes. Infrastructure providers should document dependencies, operational recovery procedures and controls for privileged access.

These questions are relevant to any asset tokenization programme, but they become especially important when assets are intended for regulated institutional markets.

What the roadmap could clarify

The planned FCA–Bank of England roadmap may help market participants understand how sandbox lessons could inform a more permanent framework. The FCA says the roadmap is expected later in 2026 (FCA).

Important areas to watch include the treatment of custody, settlement arrangements, investor recourse, interoperability and access to central-bank money or other trusted settlement assets. The roadmap may also clarify how firms should manage the transition between experimental models and permanently authorized activities.

Until those details are published, firms should avoid treating the UK’s direction of travel as blanket approval for tokenized products. The more defensible approach is to build narrowly scoped workflows, test them with appropriate controls and document where legal, operational or technical dependencies remain unresolved.

Practical takeaway

The UK’s tokenization agenda is increasingly focused on the infrastructure that makes digital securities usable after issuance. Firms assessing a project should start with the post-trade workflow, identify the control points and test how collateral, custody, settlement and investor recourse work together.

Which post-issuance process—collateral movement, settlement, custody or reconciliation—would create the clearest first use case for your organization? To explore a cautious workflow fit, explore the Fundshing Tokenization Engine.

Sources

• FS26/1: Tokenisation in wholesale markets - Financial Conduct Authority
• FCA and Bank of England set out shared vision for tokenisation in UK wholesale markets - Bank of England
• FCA publishes Feedback Statement in relation to Tokenisation in Wholesale Financial Markets - Regulation Tomorrow