Bank of England says existing rules are no barrier to tokenised collateral at CCPs, and consults on what it will check

The Bank of England launched a consultation on 29 October “supporting central counterparties (CCPs) acceptance of tokenised forms of eligible collateral”. The Bank said it “considers the existing regulatory framework is not a barrier” for CCPs accepting such collateral, “provided the collateral meets the standards required in central clearing”. It added that tokenised collateral “must remain capable of being valued, transferred and realised when needed, including in stressed conditions”.

Sarah Breeden, Deputy Governor for Financial Stability, said the consultation was “part of a major agenda between authorities and industry to enable the responsible adoption of tokenisation in financial markets”.

What the draft statement covers

The consultation paper says the draft supervisory statement does “not create a separate regulatory regime for tokenised collateral”. Instead, it sets out what the Bank would expect a CCP to have considered when it applies, through the existing process, to accept new collateral. The Bank says tokenised forms of collateral a CCP already accepts still count as new collateral if their risks differ, “including where differences arise from the method of delivery”. The paper says tokenised government bonds “may be one of the most impactful use cases”, given how widely UK CCPs use them, and uses them as its main example.

The expectations fall under five headings: liquidity, valuation and interoperability; credit and concentration risk; settlement finality and certainty of ownership; operational resilience; and custody and safeguarding. Points in the draft include:

• Liquidity. A CCP “should not assume that the tokenised collateral exhibits the same liquidity characteristics as its non-tokenised equivalent”. It should also understand any dependence on converting between tokenised and conventional forms, or on particular platforms and custodians.
• Credit. Where a token representing a government bond is created by an entity other than the sovereign issuer, the CCP should consider “whether its claim remains solely on the sovereign issuer”. Concentration limits should capture exposure to the same underlying asset “irrespective of the form in which the collateral is represented”.
• Settlement finality. The draft distinguishes between contractual finality under a token arrangement’s own rules and legal finality, which in the UK comes from the Settlement Finality Regulations for designated systems. Where a ledger and a central securities depository both keep records, a CCP “should understand which record determines ownership”.
• Operational resilience. A CCP should consider whether changes to a ledger, protocol, smart contract or permissioning, “including those initiated by entities other than the CCP”, could affect its access to collateral, and whether a failed bridge or interface could leave collateral “inaccessible or immobilised”.

The expectations would apply to UK CCPs and to recognised non-UK CCPs that the Bank considers systemically important, or likely to become so.

Stablecoins and other future collateral

The paper does not propose changes to eligible collateral. It says the use of tokenisation “does not, in itself, determine whether collateral is eligible”, and that where a CCP can show tokenised collateral meets the outcomes expected of eligible collateral, “it should be available for acceptance by CCPs should they choose to do so”. It asks whether the expectations would still work for a wider range of assets, and seeks evidence on “appropriately regulated stablecoins, tokenised MMFs and tokenised gold”. The Bank says stablecoins “may not currently be accepted by CCPs as highly liquid collateral”. Making them eligible would need either a change to the CCP Rulebook or for a firm to obtain the Bank’s permission to waive or modify the relevant rule.

The statement is drafted against the Bank’s proposed UK CCP Rulebook, which is set to replace UK EMIR’s CCP requirements. The paper says the Bank expects to publish its policy response and rules in the fourth quarter of 2026, and that they are set to take effect once HM Treasury repeals Titles III to V of UK EMIR. Responses go to the Bank by email. The Bank says they may be shared with HM Treasury and the FCA.

The consultation follows a call for evidence from ESMA on 9 October on whether, and under what conditions, EU CCPs could use tokenised collateral. Responses to that call are due by 15 January 2027.

Why it matters

For clearing members, margin is one of the clearest places where tokenisation could save money. The paper notes that market respondents pointed to “the ability to move collateral outside traditional market operating hours and across jurisdictions”. That matters more as venues plan longer trading hours while collateral still moves on settlement-system timetables.

The Bank’s message is that the rules are not the obstacle, but the evidence a CCP has to provide is detailed. A tokenised gilt issued by a third-party tokeniser brings in a new credit and operational chain. The CCP has to show that it can still sell or repo the asset in a default, and that it knows which record is authoritative. Each arrangement would go through the Bank’s approval process for new collateral. In practice, early cases are likely to be narrow, built around government bonds, and to depend on legal finality as much as on the technology. The UK’s digital gilt would be an obvious candidate, although the paper does not mention it.

The contrast with the US is useful. Under the SEC staff letter for DTC’s tokenisation service, which went live on 28 October, DTC will give tokenised entitlements no collateral value in its own risk management. The Bank is setting out how tokens could serve as margin at UK CCPs.

What we are watching

• Whether UK CCPs, such as LCH, ICE Clear Europe or LME Clear, say they plan to apply to accept tokenised collateral, and for which assets. The paper does not name individual CCPs; these are our examples.
• The Bank’s final CCP Rulebook, which it expects to publish in the fourth quarter of 2026, and the timing of HM Treasury’s repeal of the UK EMIR titles.
• Responses on stablecoins and tokenised MMFs, where any change would need a rule change or a waiver.
• How ESMA’s call for evidence, which closes on 15 January 2027, lines up with the Bank’s approach.