The UK will appoint a Digital Markets Champion to accelerate the tokenisation of wholesale markets, speeding the shift of post-trade work to digital form and keeping the country in the front rank of market change. Custodians, asset managers and market utilities will feel the effects, with potential shifts in how collateral, liquidity and hedging in derivatives operate, while Bloomberg and the official paper note the Champion will link public bodies with private firms to stop rules drifting apart across borders.
The Champion will knit private projects together, push for systems that interoperate and ease cross-border activity, according to the wholesale markets digitalisation strategy quoted.
The plan stands on three legs: market optimisation to scrap paper and cut the settlement cycle to T+1 by October 2027; technology shift using DLT, AI and controlled tests; and leadership through global alignment.
The Treasury backs two tools: a Digital Gilt Instrument (DIGIT) that settles on a DLT network, and a Digital Securities Sandbox where firms test stablecoins alongside tokenised deposits.
Tokenisation means issuing digital units on a distributed ledger that stand for an asset, splitting ownership, logging each move and settling without extra steps. Officials and cited studies predict lower cost, faster flow and wider access, and project sharp growth in tokenised real-world assets over the next ten years.
Implications and risks for market participants
Joint rule-making and sandbox tests may cut day-to-day drag and speed uptake, yet they introduce new hazards as heavy use of smart contracts and tighter links between infrastructures can transmit shocks.
Liquidity and collateral could improve as tokens move collateral faster and help create a secondary market for assets that seldom trade.
Operational and code risk rises because smart contracts need tight controls, and a bug can affect margin calls as well as settlement. Hedging dynamics may shift since faster collateral movement and new settlement paths can change basis, funding cost and risk profiles in futures and swaps.
Regulation and trust will be central, with the sandbox and English and Welsh law aiming to give certainty, while the shift will require round-the-clock tests and oversight.
The appointment of the Digital Markets Champion is the next operational step, with the Treasury listing T+1 by October 2027, the DIGIT issue and the sandbox launch as the first real tests of how the plan will touch liquidity and derivatives.
