Bank of England Seeks Feedback on Tokenized Collateral for CCPs

The Bank of England has opened a consultation on draft guidance for UK central counterparties considering tokenized collateral. The proposal describes how clearinghouses should assess tokenized forms of assets currently eligible under the proposed UK CCP Rulebook before accepting them.

The consultation was published Thursday, Oct. 29, and responses are due Feb. 12, 2027. Government bonds are among the assets considered in tokenized form. The draft focuses on how existing collateral standards apply when an asset is represented and transferred as a token.

Central counterparties (CCPs) stand between parties in cleared trades and collect collateral to manage counterparty risk. The existing framework does not bar CCPs from accepting tokenized forms of eligible collateral, provided they meet the same standards as other collateral. A CCP also must obtain required approval before accepting a new type or form of collateral.

The draft would not create a separate regulatory regime or add requirements. It sets out factors for CCPs to assess, including whether they can value, transfer and realize collateral when needed, including under stressed conditions. The proposed considerations also cover liquidity, credit and concentration risks, operational resilience and custody security.

The Bank is also seeking feedback on whether stablecoins, tokenized money market fund units and tokenized gold could serve as collateral in the future, and on the risks and practical issues they might raise. The consultation does not propose adding those assets to the eligible collateral list.

Bank of England Deputy Governor for Financial Stability Sarah Breeden described the work as “part of a major agenda between authorities and industry to enable the responsible adoption of tokenisation in financial markets.” European regulators have separately sought input on tokenized collateral for clearing in a separate EU consultation.