Bank of England Opens Consultation on Supervisory Standards for Tokenized Collateral at CCPs
Summary
- The Bank of England said it has launched a consultation to establish supervisory standards for the use of tokenized collateral by central counterparties.
- The standards cover both collateral already used by clearing houses and types of collateral that meet eligibility requirements but have not yet been adopted, requiring proof of eligibility and risk management capability.
- The core of the standards is whether collateral can be valued during market stress and quickly transferred or converted into cash, with the aim of supporting financial stability and the responsible adoption of tokenization.
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The Bank of England, the U.K.'s central bank, has launched a consultation as it moves to set supervisory standards for the use of tokenized collateral by central counterparties, or CCPs.
On Oct. 29, the BOE released a consultation paper to establish the standards clearing houses should consider in existing approval processes if they want to accept tokenized collateral. The consultation will run through Feb. 12, 2027.
Under the draft standards published that day, the supervisory scope covers both collateral already in use by clearing houses and types of collateral that meet eligibility requirements under the draft U.K. CCP rulebook but are not yet being used. When introducing a new form of collateral, a clearing house must demonstrate its eligibility and its ability to manage the related risks under the relevant procedures.
The key test is whether the collateral can be valued during periods of market stress and transferred or converted into cash within the required time frame. Sarah Breeden, the BOE's deputy governor for financial stability, said the consultation is intended to support innovation in financial market infrastructure and the responsible adoption of tokenization while maintaining financial stability.
JOON HYOUNG LEE
gilson@bloomingbit.ioCrypto Journalist based in Seoul