The UK has ambitious plans to become a global leader in tokenised finance. The government’s recent work on the future of financial markets has described tokenisation as a potential “big bang” for financial services, with estimates that it could deliver tens of billions of pounds of economic benefits.

With Tsang having contributed to the Wholesale Digital Markets Champion’s first report to the Chancellor on tokenisation, she indicates one theme has become increasingly clear: building market infrastructure is only part of the challenge. The frameworks that allow institutions to trust, use and scale these new forms of value will matter just as much.

Tokenisation promises to transform how financial assets are issued, traded and settled. It could make markets more efficient, reduce costs and open new possibilities across areas such as bonds, funds, collateral and payments.

But there is a more fundamental question that could determine whether these ambitions succeed: are new digital assets being designed in a way that achieves the accounting treatment needed for their intended use?

The balance sheet challenge

The debate around tokenisation has understandably focused on regulation, technology and market infrastructure. These are essential foundations. But institutions will not adopt new financial instruments at scale unless they can answer a more basic question: how do we record them on the balance sheet?

This matters because tokenised finance requires more than digital representations of assets. It also requires reliable ways to transfer value and settle transactions. 

A company may be willing to trade a tokenised bond instantly on a digital platform. A financial institution may be willing to hold tokenised assets. But what happens if the money used to settle those transactions cannot be treated in the same way as existing forms of settlement?

The technology may work and market infrastructure may exist, but adoption could still be constrained if accounting treatment remains uncertain.

Digital money is central to tokenised markets

Tokenisation is often discussed in terms of the asset being transformed: a bond, an equity or another financial instrument. However, markets cannot function without money moving alongside those assets.

Whether settlement occurs through stablecoins, tokenised bank deposits or other forms of digital money, these instruments need to work not only operationally, but financially.

Stablecoins provide a useful illustration. A fully backed stablecoin may appear economically similar to cash. Yet, depending on its legal structure and the rights attached to the token, accounting outcomes may differ.

This is not simply an accounting technicality. Classification affects how institutions assess liquidity, manage risk and decide whether new instruments are commercially viable.

Accounting cannot be an afterthought

Financial innovation has often focused on what technology makes possible, but successful financial markets are built on something broader: confidence. Investors, companies and financial institutions rely on reporting frameworks to understand what they own, how assets should be valued and how risks are managed.

Accounting is therefore not something that follows innovation. It is part of the infrastructure that allows innovation to scale.

The UK opportunity requires an evolution of the financial system

The UK has a genuine opportunity to shape the future of tokenised finance, but leadership will require more than building new technology platforms or developing regulatory frameworks. It will require ensuring that the different parts of the financial system evolve together.

Technology can create new possibilities, regulation can provide guardrails, but accounting will determine whether institutions can confidently adopt them.

The future of tokenisation will not be decided by blockchain technology alone. It will depend on whether the wider financial system can recognise, trust and ultimately use the new forms of value that technology creates.