Tokenisation will reshape market infrastructure regardless of what anyone does – the real question is whether the UK wants to shape that transformation or adapt to decisions made elsewhere, writes Bob Wigley, chairman of UK Finance.

Tokenisation – the representation of traditional financial assets such as bonds, funds and collateral as digital tokens on programmable ledgers – has entered a new phase in the UK's capital markets. Recent moves by the government and regulators – from guidance on tokenised funds and collateral to the Chancellor's plan for a Digital Gilt Issuance in 2027, which would put a UK government bond on distributed ledger technology, and the Bank of England's new secondary objective to support innovation in digital money – show a genuine and positive increase in momentum.

Momentum is building elsewhere too, however, most notably in the United States, where a combination of executive orders, an inclusive approach from regulators and the enactment of the GENIUS Act – federal legislation establishing a regulatory framework for payment stablecoins – is driving progress. The EU, meanwhile, has put its Markets in Crypto-Assets regulation into application, adding to the international pressure on the UK to keep pace.

UK should be the global leader in tokenisation

The prize is significant, and the UK should aim to be the global leader. But there is a risk that the market forms elsewhere, leaving the UK adapting to standards and approaches set by others rather than shaping them. This matters especially now, as the debate moves beyond proof-of-concepts demonstrating that the technology works, toward how to drive adoption at institutional scale – a shift already visible in major markets, where institutions have begun settling tokenised instruments and collateral on digital rails.

That shift raises questions about operating models, shifting market liquidity and how to manage the transition from old rails to new ones – including where that transition will be gradual, with analogue and tokenised systems running side by side, and where a big bang approach is possible.

One key area where tokenisation could deliver real benefit is wholesale fixed-income markets, where current inefficiencies generate unnecessary costs. Nasdaq data suggests that more efficient collateral mobilisation could materially reduce collateral requirements – by up to 30 per cent in some instances.

The good news is that the UK starts from a position of strength here. According to the BIS Triennial Central Bank Survey 2025, the UK accounts for 50 per cent of global OTC interest-rate derivatives turnover and 38 per cent of OTC foreign exchange turnover. If tokenisation reshapes wholesale markets, the UK is well placed to help define what comes next.

We will not be rewarded for sitting back

Leadership will not emerge organically, however. It requires co-ordination, clarity and focus. That is why UK Finance, working with Oliver Wyman, engaged policymakers, regulators and industry to assess progress and identify what must come next.

Four priorities emerged: having a clear and overarching vision, aligning digital money and tokenisation strategies, empowering the Digital Markets Champion, and concentrating efforts on priority areas.

First, the need for a vision. The UK already has the individual building blocks, from government and regulatory engagement to market expertise and technological capability. Overlaid on these should be a vision that defines the long-term market end-state, identifies priority use cases, establishes measurable indicators of progress and provides a mechanism for public-private coordination across regulators, market infrastructures and market participants.

Second, digital money must align with tokenisation. Every tokenised transaction has a cash leg, but the full benefits of tokenisation are only unlocked when the cash leg is as digital as the asset leg. The job is not to pick one winner: private sector options (tokenised deposits and stablecoins) and central bank money options should each continue to innovate and progress, with the focus on engagement and encouraging interoperability.

Third, the Digital Markets Champion's remit needs to move beyond co-ordination and reporting. The creation of this role and his early work are very welcome developments. The next step should be to give the role real teeth in terms of decision-making powers, along with a mechanism to drive action across the public and private sectors.

Finally, scale comes from focus. Concentrating on priority areas such as sovereign debt, money market instruments, repo and collateral management, and FX will generate the network effects and institutional momentum needed for wider adoption. The alternative – dispersed activity delivered all at once – risks dissipating effort across too many use cases and asset classes.

The UK's capital markets may be smaller than those of the US, but they are deep, global and highly specialised, backed by a strong legal and regulatory framework. By focusing on wholesale fixed-income markets and committing to the right architecture, governance and coordination, the UK can lead the next phase of financial innovation. Tokenisation will reshape market infrastructure – the question is whether the UK wants to shape it or adapt to decisions made elsewhere.

Now is the moment to choose leadership.

Bob Wigley is the chairman of UK Finance.