A new report from UK Wholesale Digital Markets Champion and EY partner Chris Woolard explores how the UK can reap up to £33 billion in annual economic benefits by 2035, as forecast in a recent Barclays and PwC report. Tokenization is positioned as a “network game” and “race” with a need for the UK to move in an agile manner. On the line is the UK’s leading position in foreign exchange (FX), over the counter (OTC) derivatives, repurchase agreement (repo) and funding markets.
The UK plans to be the first G7 economy to issue a natively digital government bond, the DIGIT, has launched the Digital Securities Sandbox (DSS) and has outlined a framework for tokenized funds. The private sector is working towards a tokenized deposit offering in GBTD. But the Champion’s aim is to meld individual projects into a more coherent strategy.
The paper also says that the UK and the tokenization projects need to blow their own trumpet more, emphasizing that “the UK is open for business. Open to innovation. Open to investment. And determined to remain at the forefront of global financial markets.”
However, despite outlining a handful of case studies, the paper gives strikingly little attention to two of the UK’s most longstanding projects. UK founded Fnality, the wholesale payment system using central bank money, is backed by many of the world’s global systemically important banks (G-SIBs) and two of the largest infrastructures, the DTCC and Euroclear. Despite participating in the Taskforce working groups, it received only a passing mention at the bottom of an annex on page 47. Finteum, a tokenized FX swaps startup with G-SIB members (UBS, Goldman Sachs) as well as NatWest, didn’t get a mention at all. Nor did others active in the area such as Brevan Howard and Marex. These oversights matter because these are UK firms with live operational experience, which is exactly the evidence a report about moving from pilots to production should be drawing on. Beyond the omissions, the paper outlines a worthwhile set of objectives.
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