The United Kingdom could add as much as 33 billion British pounds ($44 billion) to its annual economic output by 2035 by becoming a leader in tokenized financial markets, according to a government-backed industry task force. The estimate appears in the first report from Wholesale Digital Markets Champion Chris Woolard, who was appointed by HM Treasury to help implement the government's digital markets strategy. Developed with an industry task force, the report sets out a 12-month plan to test blockchain in a financial transaction where securities are used to borrow cash. It also calls for the UK to issue its first tokenized government bond by the first quarter of 2027.
The industry task force brings together more than 50 companies from traditional finance and crypto, including BlackRock, Goldman Sachs, JPMorgan, Morgan Stanley, HSBC, UBS, Coinbase, Circle, Ripple, Kraken, DTCC and Euroclear. The roadmap attempts to move UK tokenization beyond isolated pilots and into live markets where securities can be traded, settled and used as collateral. The report said the task was now to move 'from pilots to scale' and 'from ambition to action.'
Ripple, which is listed among the task force's industry members, backed the initiative on Monday. 'Onchain funds, bonds and repo aren't experiments,' the company said, adding that such instruments are already proving 'cheaper, better and faster than their legacy equivalents.'
UK Builds on Digital Gilt and Settlement Initiatives
The digital government bond, or gilt, itself is not a new proposal. The UK first announced the Digital Gilt Instrument pilot in November 2024. This was followed by a July 2025 update outlining plans for onchain settlement, over-the-counter trading and secondary-market development. On Feb. 12, the government appointed HSBC's Orion platform to support the pilot. The new report adds a timetable and expands the intended role for the financial instrument. Beyond calling for issuance, the report seeks subsequent digital-gilt offerings, live secondary-market trading and eligibility for use as central bank collateral. The report said tokenized securities have limited value unless they can be traded or used to raise cash, and urged the Bank of England to accept digital gilts as collateral.
The UK also has a blockchain-based wholesale payment infrastructure that could support such markets. In December 2023, London-based Fnality launched a sterling-denominated payment system tied to central bank reserves, designed to support real-time repo, tokenized securities settlement and cross-currency payments.
Background on Tokenization in Financial Markets
Tokenization refers to the process of converting rights to an asset into a digital token on a blockchain. In financial markets, tokenization can apply to bonds, equities, commodities, real estate, and other assets. The technology promises to reduce costs, increase transparency, and enable faster settlement compared to traditional systems. Major financial institutions have been exploring tokenization for years. For example, JPMorgan has its Onyx platform for tokenized deposits and repo transactions. Goldman Sachs has participated in tokenized bond issuances. The involvement of such firms in the UK task force indicates a strong industry push for mainstream adoption.
The UK has been positioning itself as a global hub for digital asset innovation. In 2023, the government introduced the Financial Services and Markets Act, which provided a framework for regulating cryptoassets and stablecoins. The current tokenization push aligns with broader efforts to attract fintech investment and retain competitiveness against jurisdictions like the European Union and Singapore. The report estimates that if the UK captures a leading share of the tokenized market, the economic boost could be substantial. While the $44 billion figure is an estimate, it underscores the potential scale of the opportunity.
Challenges and Criticisms
Despite the optimism, tokenization faces regulatory and technical hurdles. The Bank of England has expressed caution about the risks of blockchain-based finance, including systemic risks and the need for robust oversight. The report urges the central bank to accept digital gilts as collateral, but the Bank may require further testing and safeguards. Additionally, the legal status of digital tokens under UK property law is still being clarified. Lawmakers are considering amendments to the Digital Markets Bill to ensure that tokenized assets are treated as property. The industry also needs to address interoperability between different blockchain networks and legacy systems.
Some critics argue that tokenization is overhyped and that the benefits may not justify the costs of transitioning from existing infrastructure. However, proponents point to successful pilots, such as the European Investment Bank's digital bond issuance on the Ethereum blockchain in 2021. Since then, dozens of tokenized bond deals have been executed globally, though most remain small-scale experiments. The UK's push to move from pilots to scale could provide a model for other countries.
Another aspect is consumer protection. While the task force focuses on wholesale markets (institutional investors), tokenized retail products could emerge. Regulators must ensure that retail investors are not exposed to undue risks. The Financial Conduct Authority (FCA) has been consulting on a new regime for digital securities that would provide a pathway for market participants to operate under modified regulations.
Detailed Timeline and Next Steps
The report lays out a 12-month action plan. Key milestones include: within three months, launching a working group to define technical standards for digital gilts; within six months, testing blockchain-based repo transactions in a sandbox environment; within nine months, issuing the first tokenized gilt on a pilot basis; and within twelve months, enabling live secondary-market trading and collateral use. The task force will also work on interoperability with the existing settlement systems, including the Bank of England's Real-Time Gross Settlement (RTGS) infrastructure. The Bank has been developing a renewed RTGS system that can interface with blockchain platforms.
Additionally, the report calls for the creation of a regulatory sandbox for tokenized securities, similar to the FCA's existing sandbox but tailored for wholesale markets. This would allow firms to test new products without full compliance burdens. The goal is to build evidence and confidence before permanent rule changes are made.
The involvement of custodians like DTCC and Euroclear is crucial, as they provide the infrastructure for settling securities trades. Their participation indicates willingness to adapt to new technologies. Coinbase and Kraken represent the crypto exchange perspective, while Circle brings expertise in stablecoins that could facilitate onchain payments.
The broader context is the UK's post-Brexit ambition to become a global leader in fintech. The government has launched several initiatives, such as the UK Finance's Digital Currency Forum and the City of London's think tank on tokenization. The current report builds on these efforts and provides a concrete roadmap.
If successful, the UK could be among the first major economies to fully integrate tokenized securities into its financial system. This could attract capital, talent, and innovation. However, the timeline is ambitious, and execution will require coordination between regulators, policymakers, and private sector participants. The report acknowledges that failure to act could see the UK fall behind other jurisdictions, such as Switzerland or Hong Kong, which have made significant progress in digital asset regulation.
In summary, the UK's tokenization push represents a major bet on blockchain technology to modernize financial markets. The potential economic benefits are significant, but so are the challenges. The coming months will test whether the country can translate ambition into tangible market practice.
Source:Cointelegraph News