Bank of England Eyes Tokenization to Cut Costs Amid Stablecoin Review
Lawrence Jengar May 19, 2026 16:34
BoE explores tokenization to enhance markets, proposing near-24/7 settlement hours while revisiting stablecoin limits to boost UK’s digital asset competitiveness.
The Bank of England (BoE) is pushing forward on digital asset adoption, with Deputy Governor Sarah Breeden highlighting tokenization as a tool to lower costs, improve settlement speeds, and foster competition. Speaking at London’s City Week on May 19, 2026, Breeden emphasized the need for a framework that balances private-sector innovation with financial stability.
Tokenization, which involves representing assets or money on digital ledgers, could enhance the functionality of payments and financial markets if executed with trust and interoperability, Breeden said. She reiterated that central bank money would remain the anchor of the financial system, even as tokenized bank deposits, regulated stablecoins, and potentially a retail central bank digital currency (CBDC) gain traction.
"More competition, from a wider range of technologies and business models, should lower costs and improve functionality for users," Breeden noted, referencing the BoE's ongoing collaboration with industry stakeholders to achieve these goals. The bank is also reconsidering earlier limits on stablecoin holdings to reduce barriers for early adopters, a move signaling its goal to establish the UK as a digital asset hub.
Moves to Modernize Settlement Infrastructure
In a related development, the BoE has proposed extending its core settlement infrastructure to near-24/7 availability. This initiative, announced on May 18, 2026, aims to support cross-border payments and securities settlement as tokenization becomes a more prominent feature of financial markets. Extended settlement hours would align the UK with global trends toward real-time, blockchain-enabled financial systems.
The proposal builds on the BoE’s evolving stance on stablecoins. After industry feedback, the central bank has softened its approach since 2023, when stricter reserve and backing requirements were initially proposed. Breeden recently suggested easing holding caps on sterling-denominated stablecoins, signaling a shift toward more industry-friendly regulations.
In January 2026, the BoE’s CBDC Academic Advisory Group noted that while a retail CBDC isn’t strictly necessary to preserve monetary uniformity, it could play a supporting role as cash usage declines. This aligns with the Bank’s broader vision of modernizing the monetary system while ensuring stability.
UK’s Position in the Global Digital Asset Market
The BoE’s recent actions reflect a broader strategy to position the UK as a leader in digital finance. In 2023, the BoE and Financial Conduct Authority (FCA) laid the groundwork for regulating fiat-backed stablecoins and systemic payment systems. These early efforts addressed key issues like reserve quality, redemption risks, and regulatory clarity, setting the stage for the current push.
On May 18, 2026, the BoE and FCA issued a joint statement outlining their shared vision for tokenization in wholesale markets. This collaborative approach underscores the UK’s ambition to maintain a competitive edge in the rapidly evolving digital asset sector. As global players like the European Central Bank and U.S. regulators advance their own stablecoin and CBDC frameworks, the UK’s openness to industry input and flexible policy adjustments could prove pivotal.
The BoE’s recalibrated focus on tokenization and stablecoins comes as the UK competes to attract investment and innovation in digital finance. By addressing regulatory hurdles and modernizing infrastructure, the Bank aims to facilitate a smoother transition to a tokenized economy while preserving financial stability.
Market participants will be watching closely as the BoE finalizes its proposals for stablecoin limits and settlement hours. These developments could have a significant impact on digital asset adoption, cross-border transactions, and the broader competitiveness of the UK’s financial sector.
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