Building the next generation of market infrastructure

Nikhil Rathi, chief executive of the UK Financial Conduct Authority, used a dinner hosted by TheCityUK and sponsored by Nasdaq to announce that HSBC Orion has become the first firm approved to provide live Digital Securities Depository (DSD) services, marking a milestone in the evolution of market infrastructure. Speaking from the historic former Midland Bank headquarters, Rathi highlighted the shift from debating the mere feasibility of tokenising assets to assessing how such technology can enhance liquidity, capital formation and settlement speed on a large scale. He underscored the broader relevance of emerging tools—artificial intelligence, distributed ledger technology and wholesale digital payments—stating that they are no longer optional enhancements but essential components for maintaining market integrity, competitiveness and growth, with potential economic gains estimated at £33 billion to UK GDP and £14 billion in annual tax revenues.

Rathi explained that the FCA, together with the Bank of England, has been gathering industry input on tokenisation, stablecoins and crypto‑assets, receiving over 120 responses that reveal a clear demand to move beyond experimental sandboxes toward full‑scale production. Participants urged faster progress from central securities depositories and other market‑infrastructure providers, calling for regulatory forbearance where necessary and a thorough review of tax and accounting treatment for tokenised assets. In response, the regulator plans to issue a joint tokenisation roadmap with the Bank of England, outlining a transition from testing environments to established market infrastructure, while also preparing a consultation on safeguarding rules to ensure clear ownership rights and investor protection in the tokenised ecosystem.

Looking ahead, Rathi stressed that successful adoption will depend as much on industry leadership as on public policy. He noted the role of the UK’s Digital Markets Champion, Chris Woolard, in coordinating sector efforts and highlighted ongoing engagement with bodies such as the Confederation of British Industry to address investor engagement and stewardship concerns. As tokenisation and decentralized finance accelerate the emergence of continuous, potentially 24‑hour markets, traditional exchanges are expected to offer both conventional and novel contracts, including micro‑contracts and digital derivatives. The FCA’s approach will remain purposeful and proportionate, using existing frameworks where effective, intervening only when outcomes demand it, and ensuring that innovation proceeds without compromising investor protection or market integrity.

⚡ Effects Interpreter