Bank of England Deputy Governor Sarah Breeden stated Tuesday that tokenized assets could reduce transaction costs, accelerate settlement, and intensify competition in UK financial markets, provided central bank money remains the system’s foundation. Speaking at London’s City Week on May 19, Breeden outlined a vision where tokenized bank deposits, regulated stablecoins, and potentially a retail central bank digital currency coexist alongside traditional payment rails.
BoE Modernizes Settlement Infrastructure for Token Economy
The Bank of England proposed extending settlement infrastructure operating hours to near 24/7 on Monday, May 18, positioning UK markets to handle cross-border payments and securities settlement in tokenized form. The move reflects BoE’s broader infrastructure modernization aimed at supporting digital asset adoption without displacing central bank money as the monetary system’s anchor. Breeden’s comments follow the BoE’s January statement from its CBDC Academic Advisory Group, which noted that retail CBDC may play a supporting role as transactional cash use declines but is not strictly required to preserve payment system uniformity.
Stablecoin Framework Shifts to Lower Friction
The Bank of England has softened its regulatory stance on stablecoins in recent months, reconsidering reserve and backing requirements and easing consumer holding limits to reduce friction for early adopters. These changes signal BoE’s intent to strengthen the UK’s competitive position in digital asset markets. Breeden emphasized that wider competition from diverse technologies and business models should lower costs and improve functionality for users. Data from a Coinbase survey shows 80% crypto awareness among young people in the UK, indicating market readiness for tokenized payment options.
Tokenization as Competitive Lever in Global Finance
Tokenization of financial instruments addresses structural inefficiencies in settlement, clearing, and cross-border payments that have persisted for decades under legacy systems. By enabling near-instantaneous settlement and reducing intermediaries, tokenized assets could narrow cost spreads and accelerate capital deployment. The BoE’s dual approach—modernizing infrastructure while maintaining central bank money primacy—mirrors strategies adopted by other major central banks exploring digital currency and tokenization frameworks.
Next Steps: Retail CBDC and Reserve Rules
No retail CBDC launch timeline has been confirmed. The BoE’s Academic Advisory Group suggested retail CBDC may support the transition as cash usage declines, but specific reserve requirements for stablecoins and detailed cost-reduction projections remain undisclosed. Market clarity on these operational details will likely emerge as the UK government and BoE finalize tokenization standards.
