Bank of England outlines tokenization, stablecoin vision for UK finance

Sarah Breeden, the Bank of England's Deputy Governor for Financial Stability, said the central bank will focus its future strategy on tokenization to modernize finance in the UK.

During her Tuesday speech at London's City Week 2026 conference, Breeden said the future retail payment system should feature multiple forms of interchangeable money, including tokenized deposits and stablecoins.

The deputy governor pointed out that using shared ledger technology has the potential to make payments cheaper and faster, with fewer intermediaries. She added that smart contracts allow customization, conditionality, and automation, which can further improve efficiency in retail payments.

"In retail payments, we want a multi-money system that promotes competition and choice between robust forms of money," Breeden said. "Alongside traditional bank deposits, people should be able to pay with tokenized bank deposits, regulated stablecoins and, potentially, a retail central bank digital currency."

Breeden also said the Bank of England is going "a great deal" to support responsible adoption of AI, including agentic payments and commerce.

Initiatives

The Tuesday speech further detailed ongoing and planned initiatives regarding tokenization.

Breeden said the bank plans to publish draft rules for systemic stablecoins next month and finalize them by the end of this year, while considering risks that may arise from rapid stablecoin adoption. To mitigate early risks, the bank may issue temporary limits on the total amount of stablecoins that can be issued.

"We also want to encourage banks to adopt these new technologies in the money they issue," Breeden said. "We continue to expect banks to innovate in tokenized deposits, and our work on next-generation retail infrastructure will ensure those deposits can be used for payments between banks, not just among customers of the same bank."

On May 18, the Bank and the Financial Conduct Authority (FCA) published a joint consultation for its tokenization program, which centers around the Bank-FCA Digital Securities Sandbox, which launched in 2024 and runs until January 2029. The sandbox allows firms to establish live trading venues and settlement systems for tokenized securities.

Breeden said 16 firms are preparing to launch on the sandbox from late 2026, with participants including Euroclear, HSBC, and London Stock Exchange Group. 

"The prudential treatment of UK banks’ exposures to tokenized assets will be the same as for their non-tokenized equivalents where the legal rights are identical, and the underlying risks are comparable," Breeden added.

Digital pound still under consideration

The BOE will also continue to support the Digital Gilt initiative, which is the UK government's pilot tokenized sovereign bond.

Meanwhile, Breeden commented that the Bank of England will present the conclusions of its design phase for a central bank digital currency (CBDC) project later this year.

"The task now is for authorities, government and industry to build on the UK’s strong foundations – to put some ‘runs on the board’ and show that we are deepening our tokenized finance ecosystem," Breeden said in the speech.

The UK authorities' efforts to design the future of finance with distributed ledger technology and tokenization are in line with global movements. On Tuesday, Japan's ruling Liberal Democratic Party (LDP) officially made its position to build the future financial system using AI and blockchain, centering around tokenization, stablecoins, and agentic commerce.