By Huw Jones
LONDON Britain's role as a leading financial centre is at stake unless it comes up with a roadmap for digital representations of stocks, bonds, loans and real estate, trade association UK Finance said in a report on Thursday.
So-called tokenised assets can be exchanged on distributed ledger technology (DLT), also used for cryptocurrencies, to keep track of transactions, validate ownership, and dispense with a paper trail.
The report, written with consultants Oliver Wyman, said tokenised issuance is still a fraction of securities issued traditionally on exchanges, with digital bond issuance just 1% of the $20.6 trillion of long-term fixed income issued in 2021.
Issuance in Britain has been minimal compared with places such as Singapore, Hong Kong, France and Germany, and it needs to partner with industry to increase momentum, the report said.
"The public sector should guide innovation by setting out a clear and supportive roadmap for tokenisation and encouraging the public and private sectors to collaborate on needed infrastructure and standards," it said.
"Failure to act will result in the UK losing an opportunity to consolidate its position as a top global financial centre."
There is growing consensus that tokenisation could be transformational for markets, though estimates on the impact vary widely, the report said.
"Industry participants agree that tokenisation will enable heightened liquidity across new and existing asset classes, but opinion is mixed as to which asset classes present the most value," it said.
A new financial services law was approved last week which will launch a platform later this year for testing the use of DLT in market infrastructure.
The finance ministry and Financial Conduct Authority should take urgent action beyond the issuance of digital UK government bonds to encourage experimentation with tokenised securities, the report said.
(Reporting by Huw Jones; Editing by Mark Potter)
