Judging by recent developments, the UK has built up a strong appetite for tokenisation.

In August, the Financial Times reported that ministers had given the Bank of England a mandate to boost innovation in digital currencies. The following month, UK Finance issued a report setting out how the UK can become a world leader in securities tokenisation. And in October, asset manager Aviva Investors announced the launch of a tokenised share class within its £22bn Sterling Liquidity Fund to improve client outcomes.

But does the UK have what it takes to surge past its global competitors? 

HM Treasury’s Wholesale Digital Assets Champion Chris Woolard CBE will deliver an opening address at ICAEW’s Digital Assets Conference on 13 November, setting out the direction of travel in UK policy and regulation. He will then join a panel of other fintech experts to tackle the question: Can the UK still win the digital asset race?

Keeping up with other nations

In Woolard’s assessment, the UK “has been doing some really sensible things” on digital markets, through projects such as the Digital Gilt Instrument (DIGIT) Pilot, the Great British Tokenised Deposit, the Tokenised Funds Blueprint and other initiatives.

However, the UK must recognise that jurisdictions such as the UAE, Singapore, Hong Kong, Switzerland, the EU and, most notably, the US, have also made strong progress.

“As a global financial hub, we are well placed to lead this next wave of innovation – but we must move at pace,” he says. “Falling behind would bring fundamental risks to the UK’s position as a global leading financial services hub, including the risk of liquidity moving offshore, being a standards taker rather than a standards setter, and new market infrastructure concentrating in rival markets.”

Conversely, he notes that if the UK gets it right, the economic prize is huge: £33bn could be added to economic output and £14bn in tax receipts each year by 2035.

With that in mind, he says: “I am particularly pleased to be leading the Digital Market Champion Taskforce on behalf of the government – together with over 80 financial services firms – to push our efforts further forward, so that the UK leads the next generation of markets as it leads today’s.”

Strategic approach

For Woolard, the UK is starting from a position of strength. “We already have modern and sophisticated wholesale markets,” he says, “with deep pools of capital and liquidity driving global growth. The key challenges for the market for this coming year will be turning the many excellent individual initiatives into a broad, strategic approach to tokenisation and wholesale digital markets.”

That work, he explains, has three core priorities:

In following those priorities, Woolard says, the UK will send out a clear message: that it is open to innovation and investment, and determined to remain at the forefront of global financial markets.

Competitive drive

From Woolard’s vantage point, the importance of tokenisation is not missed within industry – indeed, the Taskforce features nine chief executives from across the finance sector.

“We also have various senior representatives in areas ranging from primary issuance and secondary liquidity markets through to collateral and prudential management,” he says. “This is all underpinned by expert representatives from the legal, tax and compliance sectors, as well as various others needed to deliver at scale and at pace.”

In terms of its priorities, the Taskforce is working to see the practical delivery of an end-to-end repo use case on blockchain in the first half of next year. Woolard explains: “Repo is an area where the UK is a global leader, not only reflected in market scale and liquidity, but also the depth of our legal, regulatory, infrastructure and professional services ecosystem. Focusing on repo also enables us to innovate in both primary and secondary markets and offers the greatest opportunity for efficiencies in the UK.”

Turning to financial services firms, Woolard points out that the key driver for participation is their own competitiveness. He stresses that if financial services firms are not operating in a tokenised system in the coming years, “you won’t be operating in financial services for much longer. Firms need to quickly plan where tokenisation can reduce costs and consider how to manage the transition to this new technology.”

For the UK more broadly, he adds: “We need to keep up the pace we have developed in the last few months. The regulators and government have been doing some great work. We need them to continue to lean in to enable firms to take risks and innovate, to ensure that we are not just internationally competitive, but the pre-eminent financial centre for tokenisation in the years ahead.”