London Authority Sets Out Plan For Tokenizing Wholesale Financial Markets

London has issued a report on accelerating tokenization in wholesale financial markets.

“Wholesale financial markets are a fundamental driver of economic growth, directly supporting jobs and financing activity in the wider economy,” the City of London Corporation said in a news release promoting the report Monday (July 13). “Tokenising wholesale markets will boost the U.K.’s competitiveness, generating additional liquidity and revenues, securing cost and capital efficiencies, enabling innovation, and strengthening the resilience of the financial system.”

The release added that while England has already made progress via a series of pilots and small-scale commercial trials, international competition has made it necessary for the country to secure a key role in the next generation of global market infrastructure.

The report, produced by Chris Woolard, the treasury’s Wholesale Digital Market Champion, cited projections that put the tokenized real-world assets market at $88 trillion by 2035, meaning up to 33 billion pounds (about $44.1 billion) could be added to Great Britain’s yearly economic output and 14 billion pounds (about $18.7 billion) in annual tax revenues within that time frame.

“The U.K. has a once-in-a-generation opportunity to lead a digital Big Bang in financial services,” said Chris Hayward, policy chairman of the City of London Corporation. “By accelerating the adoption of tokenisation across our wholesale markets, we can build the market infrastructure of the future, set global standards, and reinforce the U.K’s position as the world’s leading international financial center.”

The report also noted “evidence of convergence” between established players and more recent entrants, citing the example of Ripple’s $1.25 billion purchase of prime brokerage Hidden Road last year, as well as Santander’s use of Ripple’s blockchain for cross-border payments.

In addition, the report set out key next steps for the industry, with the backing of the government and British regulators, to tokenize the U.K. financial markets “at scale.” These include developing secondary markets, tokenizing collateral and expanding on the issuance of DIGIT, the U.K. Digital Gilt instrument.

“As one of the world’s largest and most international financial services markets, the U.K. is uniquely placed to become the global leader in wholesale market tokenisation,” Woolard said. “There is so much potential, technologically and economically, if the right actions are taken and decisions are made now to embrace and support tokenisation.”

The release lists more than 50 companies supporting the project. In addition to Ripple, his list includes Barclays, Circle, Citi, Coinbase, Goldman Sachs, JPMorgan and Kraken.