Key facts
- Top financial institutions are advocating for the digitalization of UK financial markets.
- A report suggests tokenization could boost the UK economy by £33 billion annually.
- Tokenization is seen as a way to increase speed and reduce administrative costs in financial markets.
- The UK faces strong competition in digital markets from the US, UAE, Singapore, and Hong Kong.
- The Bank of England has revised its stablecoin regulatory framework.
Top financial institutions in the City of London are amplifying calls for the UK government to accelerate the digitalization of financial markets, a move they believe could deliver a significant annual boost to the economy. A new report, supported by a taskforce including Barclays, JP Morgan, and Lloyds Banking Group, suggests that the tokenization of markets could add hundreds of billions of pounds in economic value to the UK over the next decade.
Tokenization, which involves the digital representation of asset ownership on a blockchain, is seen as a way to enhance speed and reduce administrative costs by replacing traditional market infrastructure with automated software. The report, led by wholesale digital markets champion Chris Woolward, outlines a 12-month plan with nine key areas to leverage this technology. It emphasizes that tokenized markets offer substantial opportunities for efficiency, innovation, and defending the UK's global market position.
Estimates from Barclays and PwC suggest that global adoption of tokenization could generate a £33 billion increase in the UK's economic output and an additional £14 billion in tax revenue. However, Miles Celic, chief executive of TheCityUK, warned that global competition is intensifying and urged the UK to be more ambitious and creative to maintain its standing.
The report highlights significant competition from the US and the growing digital market presence in the United Arab Emirates, Singapore, and Hong Kong. It cautions that a lack of pace could jeopardize the UK's position as a leading global financial services hub. Chris Hayward, policy chairman of the City of London Corporation, stated that the UK could lead a "digital big bang in financial services" by embracing tokenization.
Recent regulatory developments around digital assets have been contentious. The Bank of England, after initially facing criticism for its proposed rules on stablecoins, eventually watered down its final framework, removing a limit on customer deposits but imposing a temporary cap on the total volume of sterling-denominated tokens in circulation.