U.K. Finance Advances Tokenization and CBDC Platform Development

U.K. Finance, a prominent trade association, has successfully completed the experimental phase of its innovative tokenization and central bank digital currency (CBDC) platform. The organization is now poised to collaborate with regulators and various public entities to further develop payment networks based on this cutting-edge technology. This initiative involved the participation of 11 member banks, including major institutions such as Barclays, Citi UK, HSBC, and NatWest, along with several professional service firms.

The findings from this program highlighted that such a platform has the potential to not only deliver significant economic value but also enable new functionalities, including programmable payments. According to U.K. Finance, the Regulated Liability Network (RLN) serves as a financial market infrastructure that can introduce novel capabilities for payments and settlement, emphasizing features like tokenization and programmability.

As the exploration of tokenization gains momentum, it is important to note that tokenization refers to the process of bringing real-world assets, such as securities like stocks, onto a blockchain. Last year, the U.K.’s Financial Conduct Authority (FCA) expressed its support for a report by industry leaders focusing on the implementation of fund tokenization. Moreover, the recently elected Labour government articulated its ambition earlier this year to position the country as a leading hub for securities tokenization, particularly in the context of the upcoming general election.

Peter Left, co-chair of the RLN Project, stated, “Through collaborative efforts, we have showcased how this platform can align developments in money and payments with shared objectives of both public and private sectors, ultimately delivering clear, long-term benefits for customers and the industry alike.”

The core of this platform features a multi-issuer tokenization mechanism that facilitates the issuance of tokenized commercial bank deposits, while also simulating a wholesale CBDC, a digital token provided by a central bank intended for institutional use rather than retail consumers. Additionally, it incorporates an application program interface (API) layer designed to enhance interoperability across various forms of money and existing ledgers.

U.K. Finance concluded by stating that “the legal and regulatory framework of the U.K. is sufficiently adaptable to support the establishment of a ‘platform for innovation’, pending further implementation and regulatory discussions.”