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BPX is tokenising securities markets

The tokenisation of securities markets. Why now?

The tokenisation of securities markets is happening now. The UK Government has expressed its commitment to promoting the adoption of distributed ledger technology (DLT) within UK financial markets, through legislation and other initiatives. The Financial Services and Markets Act 2023 granted His Majesty’s Treasury (HMT) new powers to facilitate digital asset innovation.

In response, HMT launched the Digital Securities Sandbox (DSS), a collaborative initiative between the Bank of England and the Financial Conduct Authority (FCA). The DSS provides a regulated, live environment designed to explore emerging technologies, particularly DLT, in the issuance, trading, and settlement of financial securities in the UK.

This legislation, along with the introduction of the DSS, has laid a strong foundation for the growth of the digital securities market in the UK. The UK Government continues to build on these foundations through its recent announcement to launch a pilot government debt securities programme, “DIGIT”, exclusively within the DSS.

The number of central banks and regulators that are supporting the use of DLT-based currency-related financial services within their local jurisdictions also continues to grow. As of today, 134 countries representing 98% of global GDP—are progressing the transformation of fiat currencies into digital forms, including CBDCs, stablecoins or tokenised deposits. UK already has access to multiple digital currency payments and banking services. This will support realisation of fully tokenised trade and payments settlement, which has long been an identified benefit of DLT-based financial systems.

On review of private sector-led initiatives, access to tokenised securities and currencies continues to grow as institutions and end consumers become more comfortable using mature digitalised financial services. We are seeing rapid increases in banks, fund or investment managers, and other financial institutions growing their digital asset or currency offerings. This has supported delivering customer demands for hyper-customised products whilst simultaneously driving internal efficiencies.

Tokenisation of securities markets is therefore ready for transformation as customers can trade their currently held digital assets or currencies for increased digital assets investor returns and marketplaces can leverage digitalised settlement services for greater efficiencies. The market also continues to promote migration to tokenised assets under management as the benefits of DLT and tokenisation are now well known.

BPX’s mission is to enhance liquidity in investment funds and support the digitalisation of the securities markets. We are therefore delighted to have been accepted into Gate 1 of the Digital Securities Sandbox (DSS) and are proud to be the only FCA-authorised exchange and fund manager to achieve this milestone.

Within the DSS, BPX is working to implement end-to-end workflows that support the entire lifecycle of tokenised financial securities. This includes primary issuance, settlement, custody, ongoing maintenance, secondary trading, and collateralised lending.

To achieve our mission, we aim to support market participants in transitioning from traditional dematerialised processes to a tokenised framework. This evolution offers the potential to reduce operational costs and risks while providing a more streamlined and engaging experience for all stakeholders, ultimately enhancing liquidity.

Whilst BPX is initially focused within the UK, the UAE and other forwarding thinking jurisdictions also continue to show a bright future for global tokenised securities markets. We look to support a new global digitalised economy that realises the value of digital RWAs, currencies within their respective financial markets.

Digital Asset Timeline

Laws and regulations in many advanced economies are changing to accommodate digital assets, paving the way for a New Age of Finance where all Financial Market Infrastructure (FMI) is DLT-based. Recently, the UK has made significant legal and regulatory progress, designed to position it as a global centre for digital assets. Here is a timeline summarising the progress so far.

BPX innovations

BPX is disrupting legacy processes by removing barriers and eliminating inefficiencies from traditional capital market workflows and automating processes with the latest proven technologies.

By implementing a new end-to-end digital workflow BPX is enhancing stakeholder user experience, reducing costs and risks and improving liquidity and profitability. BPX is implementing innovations and achieving desirable outcomes.

Innovations

Outcomes

Three regulated markets in one trading venue: Issuance, Trading, and collateralised Lending.
A fully integrated marketplace serves to boost liquidity.

Streamlining dematerialised & tokenised securities workflows using advanced technologies including distributed ledger technology (DLT).

Delivering faster, simpler, and more cost-effective services, thereby reducing risk and increasing customer participation and profitability.

World’s first real estate collateralised lending marketplace for fund unit owners.

Increases portfolio returns and liquidity for fund unit owners.

First exchange able to issue and legally settle tokenised securities in the UK.

Ensuring transaction certainty.                                                          

Cultivating a more inclusive marketplace connecting Issuers with a wider and global Investor community.

Accessibility enhances market liquidity.                                          

BPX Opinion

Distributed Ledger Technology (DLT) and tokenisation remain the leading technical innovations our customers believe will drive future growth in financial markets.”

“In the recent past, the application of DLT in wholesale capital markets has been largely experimental; this is quickly changing as legislators and regulators are removing the barriers to digital asset adoption.

-Ali Celiker Co-CEO

We have no doubt that DLT will fundamentally transform and enhance the foundations of financial markets.

“In our opinion, DLT represents a change of similar significance to the advent of the internet.”

-Ali Celiker Co-CEO

BPX is committed to driving the digitalisation of capital markets

Buy-in from industry leaders

BPX convened a working group of leading companies in the digital asset ecosystem that span the capital markets value chain. The inaugural thought leadership event took place on 25 April at Cambridge University, where CEOs and senior representatives from the companies attended.

UK Digital Securities Sandbox

BPX is the only regulated exchange and fund manager to be accepted into Gate 1 of the joint Bank of England / Financial Conduct Authority Digital Securities Sandbox (DSS). The DSS provides a regulated live environment to support innovation in distributed ledger technology (DLT) across securities issuance, trading, and settlement in the UK.

Contributing to policy change

BPX is a member of Global Digital Finance (GDF) and a participant in the Digital Finance APPG, helping to shape UK digital asset policy.

BPX offers a convenient online platform for investing in global investment funds. Authorised and regulated by the FCA.