The Bank of England is seeking feedback on draft expectations for tokenized collateral at clearing houses, aiming to keep such assets usable for margin and default obligations when markets are strained.
Published Oct. 29, the draft would cover tokenized forms of collateral already eligible under the Bank’s proposed central counterparty (CCP) Rulebook. That includes collateral that meets the proposed rules but is not currently accepted by a particular CCP. The Bank says the statement would explain how its current supervisory framework applies when a CCP seeks approval to accept such an asset. The proposal would not create a separate regime or change the eligible-collateral list.
Clearing houses manage counterparty exposures in markets where trades are centrally cleared, and hold collateral for margin and default-fund obligations. The draft focuses on whether tokenized collateral can be valued, transferred and realized when needed, including in stressed conditions. Its topics include liquidity, valuation, interoperability, settlement finality, credit and concentration risk, operational resilience, custody and safeguarding.
The Bank says tokenization could make collateral quicker to mobilize and manage, including across national borders. It identifies tokenized government bonds as a potentially important use because UK CCPs widely use government bonds. The consultation also invites views on applying the approach to possible future collateral, such as tokenized money market fund units, gold and stablecoins.
These potential benefits come with issues the Bank says need attention, including cyber risk, custody, legal certainty and interoperability. It also flags dependencies that could arise from faster automated processes. Slow transfers or settlement can leave firms holding larger buffers or placing assets ahead of need, and pressure may rise when margin requirements climb sharply during market stress.
The consultation follows the Bank’s July 2025 consultation on its proposed CCP Rulebook. The work is part of a broader program involving the Bank, the Financial Conduct Authority, HM Treasury and industry on tokenization in UK wholesale markets.
Sarah Breeden, the Bank of England’s deputy governor for financial stability, called the effort part of “a major agenda between authorities and industry to enable the responsible adoption of tokenisation in financial markets.” Responses are due Feb. 12, 2027.
