The Bank of England has launched a public consultation to develop a regulatory framework allowing clearing houses to accept tokenized collateral in the United Kingdom. This move marks a significant step by the central bank toward integrating digital assets into mainstream financial market infrastructures.
Framework for Tokenized Collateral
Under the Bank of England’s current rule book, central counterparties—financial institutions that act as intermediaries to guarantee and clear trades—may accept digital forms of collateral, provided those assets are already authorized for use. The bank released a statement clarifying the expectations and requirements for clearing houses seeking to use tokenized assets under existing regulations.
One key condition outlined by the Bank is that tokenized collateral must remain capable of being valued, transferred, and liquidated, even under periods of market stress. Deputy Governor for Financial Stability Sarah Breeden stated that this initiative is “part of a major agenda between authorities and industry to enable the responsible adoption of tokenization in financial markets.”
Sarah Breeden, Deputy Governor for Financial Stability, described the consultation as integral to ongoing efforts by authorities and market participants to promote responsible adoption of tokenization in the financial sector.
The consultation will remain open through February 12, 2027. The proposal restricts clearing houses to accepting only highly liquid collateral that presents minimal credit and market risk, covering assets such as cash, financial instruments, bank guarantees, and gold.
Expanding Tokenization in the UK
This proposal follows a broader industry-wide push in the UK to explore tokenization. Earlier this year, both the Bank of England and the Financial Conduct Authority (FCA) requested input from industry stakeholders and academics on the future application of tokenization in wholesale markets. The consultation received 123 responses, with most contributors highlighting significant opportunities in post-trade activities, particularly collateral transfer processes between financial institutions.
On October 21, the FCA initiated two consultations: one on exclusions within the cryptoasset sector and another focusing on decentralized finance. Both consultations will close on November 18, with the final guidance expected in January 2027. The comprehensive UK cryptoasset regulation package is set to take effect on October 25, 2027.
Mini dictionary: Financial Conduct Authority (FCA): The UK’s financial regulator, overseeing conduct and integrity within financial markets to protect consumers and promote competition.
US Crypto Council Proposes Vault Regulation
Across the Atlantic, regulatory discussions have taken a different shape. In the United States, the Crypto Council for Innovation (CCI)—a trade group including members such as Bitwise, Galaxy Digital, and Morpho—submitted a comprehensive 238-page report to the Securities and Exchange Commission (SEC). The group seeks regulatory clarity on how federal securities law should apply to crypto vaults, particularly as software increasingly automates roles traditionally filled by financial intermediaries.
Vaults are smart contract platforms that receive token deposits, often to facilitate lending and investment operations. According to S&P Global Ratings data from April 2026, these vaults currently hold at least $131 billion in assets. Major institutional players, including Apollo Global Management and Société Générale, have shown growing interest in these digital infrastructure tools.
Mini dictionary: Crypto Council for Innovation (CCI): An alliance of top companies and organizations in the digital asset sector focusing on advancing regulatory and policy initiatives for blockchain and cryptocurrency innovations.
As described by Alison Mangiero of CCI, “A vault is infrastructure,” underscoring the fundamental role these smart contracts play in contemporary decentralized finance.
Debate Over Human vs. Automated Control
The CCI’s core argument centers on the degree of human control over investor assets in vaults. The group proposes regulatory differentiation depending on whether vaults operate by predetermined, algorithmic rules—such as automatic stablecoin lending—or whether human operators retain discretion to manage or redirect invested funds.
Most existing vaults combine both approaches. According to CCI, only vaults where operators maintain significant control should be regulated as securities. The report introduces a “control test,” inspired by standards in the CLARITY Act, to separate truly decentralized platforms from those only decentralized in name.
CCI also recommends the SEC adopt a regulatory approach similar to its oversight of exchange-traded funds (ETFs), with calls for independent audits and the ability to pause vault operations in response to security incidents. However, the report notes that such measures may not always recover assets in the event of a cyberattack.
