Key Takeaways
- UK regulators are accelerating tokenization efforts.
- Coinbase says DeFi will determine whether tokenization succeeds.
- Britain faces growing pressure to stay competitive.
Britain’s financial regulators on Thursday laid out a joint vision for tokenized wholesale markets, aiming to give financial firms greater confidence to adopt blockchain-based infrastructure.
It comes as the country seeks to modernize capital markets and reinforce London’s global financial standing.
Coinbase believes the new push could “generate wealth” for its citizens through expanded participation, but policymakers will need to go beyond simply digitizing wholesale markets.
UK Tokenization Push
Earlier this week, the Financial Conduct Authority (FCA) and the Bank of England said tokenization, the process of creating digital representations of real-world assets, could streamline wholesale markets by lowering costs and strengthening resilience.
“Tokenization has the potential to transform wholesale markets — reshaping how assets are issued, traded and settled,” Simon Walls, executive director of markets at the FCA, said in a statement.
“We want to support firms in adopting this technology to lower costs, reduce risk, and unlock new services,” Walls added.
The regulators also launched discussions with industry participants on how existing rules could support or constrain the safe adoption of tokenized finance.
Sarah Breeden, deputy governor for financial stability at the Bank of England, said the UK had already laid “strong foundations” for adoption and must now move “from pilots to production to support financial stability and sustainable growth.”
The Bank of England also published a consultation on extending operating hours for its real-time gross settlement (RTGS) and CHAPS payment systems toward near 24/7 settlement.
Coinbase Pushes for a DeFi-Enabled Future
Crypto exchange Coinbase welcomed the UK’s approach but argued the technology’s full potential would only be realized if regulators allow DeFi to play a meaningful role in future markets.
“Fantastic to see the UK setting out a clear vision for tokenization in wholesale markets,” said Katie Harries, Coinbase’s head of policy for Europe.
“The ambition should be this: anyone, anywhere, should be able to access global equities — and fractions of them — on their smartphone, to self-custody those assets, send them peer-to-peer, and borrow against them,” Harries said.
She added that to deliver this model, tokenization will require a full embrace of DeFi, which, in turn, will create wealth for citizens.
“The opportunity is huge — not only for companies seeking new pools of capital, but also for the ‘unbrokered’: the many individuals globally who are unable to participate in capital markets today.”
“…and with some of the lowest participation levels in the G7, the UK can deliver meaningful benefits for its citizens by taking an ambitious, forward-looking approach to tokenization,” she added.
Her comments highlight the broader debate underneath the UK’s tokenization push — will blockchain markets remain largely controlled by banks or evolve into more open financial systems?
The Regulatory Debate Beneath UK Tokenization
While global banks have increasingly embraced tokenization, regulators worldwide remain cautious about DeFi due to concerns about investor protection and associated risks.
The UK regulators did not explicitly endorse public blockchain-based DeFi systems; instead, they focused on market infrastructure and the treatment of tokenized assets.
Legal experts at Linklaters said earlier this year that Britain’s proposed cryptoasset regime includes measures designed to avoid creating an “uncompetitive dynamic” that could push crypto trading firms offshore.
Among the proposed changes are exemptions that would allow some firms conducting crypto trading to operate without requiring full UK authorization, provided they are not directly providing services to clients.
The government has also proposed exemptions for some stablecoin payment activities and certain crypto safeguarding arrangements tied to tokenized securities.
But uncertainty remains over how far regulators are willing to go in accommodating public blockchain infrastructure within mainstream finance.
Britain Competes for Digital Finance Leadership
The UK has ramped up efforts to position itself as a global hub for digital assets and tokenized finance amid growing competition from the US, EU, Singapore and the United Arab Emirates.
It comes after reports that the US Securities and Exchange Commission (SEC) could introduce an “innovation exemption” framework that would allow the issuance of tokenized versions of publicly traded stocks.
If implemented, the proposal could mark one of the clearest regulatory openings yet for bringing real-world assets fully on-chain.
Under the reported framework, third parties would be able to issue blockchain-based representations of equities, such as Apple, to trade on DeFi platforms.
Bloomberg reported that platforms operating under the exemption would still need to provide certain shareholder-related rights.
The report comes as financial institutions have increasingly moved into tokenized finance in recent months.
JPMorgan announced it was expanding its blockchain-based asset offerings through a second tokenized money market fund on Ethereum, according to filings reported by Bloomberg.
Under the proposed structure, investors could hold fund shares in digital wallets, transfer them between counterparties, or use them as collateral within crypto markets.
UK Falling Behind?
The UK’s latest tokenization push also follows months of warnings from crypto executives and fintech firms that regulatory uncertainty risks driving digital asset activity overseas.
Speaking at the Zebu Live conference in London last October, Mohamed Ezeldin, head of Tokenomics at Animoca Brands, said Britain’s ambition to become a global crypto hub had a long way to go.
“The UK says it wants to be a leader in emerging technologies,” Ezeldin told CCN.
“But realistically, no steps have been made to alleviate any of the pain points.”
Ezeldin said high taxes, regulatory uncertainty, and political instability were pushing founders to relocate to jurisdictions such as Dubai and Lisbon.
“A lot of founders are leaving the UK, moving to Dubai and Lisbon for tax breaks,” he said.
“The instability within the UK government right now is not a beacon of success,” Ezeldin added.
“‘Come to the UK, we’re in a solid phase of growth,’ that’s not been the case.”
Similar concerns were raised earlier last month at the Innovate Finance Global Summit in London, where top executives warned cumbersome regulation was pushing activity abroad.
Industry executives said lengthy and sometimes duplicative regulatory approval processes were slowing adoption, with some Financial Conduct Authority registration applications taking close to a year.
Nigel Khakoo, senior vice president at Ripple, warned UK policymakers needed to move faster.
“There’s an enormous amount of financial talent in the UK,” Khakoo said, describing Britain as historically “a place of trust in the financial markets, with the rule of law, a deep talent pool and historically progressive regulation.”
“We need to exercise that again,” he added.
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Kurt Robson is a London-based reporter at CCN, specialising in the fast-moving worlds of crypto and emerging technology. He began his career covering local news in Cornwall after graduating from Falmouth University with First Class Honours in Journalism. There, he cut his teeth on everything from council meetings to missing swans.
He quickly rose through the ranks to become a frontline journalist at several of the UK’s leading national newspapers. Over the years, he has interviewed musicians and celebrities, reported from courtrooms and crime scenes, and secured multiple front-page exclusives.
Following the upheaval of the COVID-19 pandemic, Kurt shifted his focus to technology journalism—just ahead of the AI boom. With a natural curiosity and a trained eye for emerging trends, he has found a new rhythm in reporting on innovation.
At CCN, Kurt's work focuses on the cutting edge of crypto, blockchain, AI, and the evolving digital world. Drawing on his background in people-first reporting and his deep interest in disruptive tech, Kurt delivers stories that are insightful, entertaining, and human-centric.
