Rewiring the core: What the UK’s focus on digital financial markets means for Financial Market Infrastructures

The UK’s success in consumer fintech has laid the groundwork for transforming the foundations of the financial system. Policy attention is now moving beyond front-end innovation to the digitalisation of core market infrastructure, with tokenised wholesale markets seen as the next battleground for international competitiveness. The UK is positioning itself as a leading venue for tokenised assets, stablecoins, open banking and next-generation payments infrastructure. This has direct implications for financial market infrastructures (FMIs).

The UK’s coordinated approach

At UK FinTech Week 2026, the government announced its intention to actively drive transformation in the financial system. Rather than focusing solely on fintech growth, the announcements signal a coordinated push to build tokenised wholesale markets and modern digital infrastructure as a core element of the UK’s future competitiveness. 

• Scaling tokenisation from concept to infrastructure: A central ambition is to accelerate adoption of tokenised financial assets in wholesale markets, moving beyond pilots into production. This implies a fundamental shift in how assets are issued, traded and settled, reflecting confidence that distributed ledger technology (DLT) can underpin core market infrastructure.

• A system-wide approach to leadership and coordination: The appointment of a Wholesale Digital Markets Champion reflects recognition that the transition to tokenised markets requires alignment across regulators, financial institutions and infrastructure providers. It presages a more joined‑up, delivery‑focused programme rather than a series of isolated initiatives.

• Modern payments and digital money: Payments reform is a key pillar, including regulating stablecoins for payments, enabling tokenised cash deposits, and creating a more integrated framework covering both traditional and tokenised payments. The logic is clear: tokenised markets depend on efficient digital settlement assets, so payments reform and market infrastructure transformation are being developed in tandem.

• Towards an integrated regulatory framework: The government emphasised rationalising regulation to reduce fragmentation between regimes and aligning payments, digital assets and financial services regulation within a more coherent architecture capable of supporting evolving market structures at scale.

• AI and next-generation finance: Policymakers also flagged the growing role of AI-driven financial services, including the need to adapt payments regulation to transactions initiated or managed by AI systems.

Implications for FMIs

The UK is seeking to design a regulatory framework for a more integrated digital financial system in which tokenisation, digital money and automation converge. This signals a broader shift in market structure, increasingly centred on control of infrastructure – particularly the “rails” and associated governance, compliance and risk management functions – rather than customer‑facing products.

This places FMIs, exchanges, clearing houses, custodians and settlement systems, at the centre of change. For these players, it represents a strategic inflection point, with the potential of tokenisation and other technologies to reshape core functions such as issuance, trading and settlement, particularly in post-trade processes. The policy focus is on enabling models in which these activities are integrated and potentially executed on a single ledger rather than across multiple intermediaries.

At the same time, the emergence of different forms of digital money, especially regulated stablecoins, introduces a more plural settlement environment. Settlement may involve a wider mix of assets, potentially altering how existing infrastructure operates.

New infrastructure providers, including fintechs, banks and technology firms developing tokenisation platforms and digital settlement networks are increasing competitive pressure. This is accelerating convergence between payments and securities infrastructure as systems become more real‑time, interoperable and API‑driven.

Modernising payments regulation reinforces this trend. As payment systems evolve, the distinction between payment infrastructure and securities settlement infrastructure is beginning to blur. Policymakers are also focused on removing legal and regulatory frictions that have slowed adoption, signalling a shift from experimentation toward deployment at scale.

Taken together, these developments point to a policy direction that directly engages with – and may ultimately reshape – the traditional roles of FMIs.

A more interventionist approach?

The appointment of the UK’s first Wholesale Digital Markets Champion is both symbolic and practical. It reflects a recognition that the transition to digital financial infrastructure requires active coordination across regulators and industry, rather than incremental reform within existing silos.

The role is likely to focus on identifying and addressing legal and regulatory barriers to tokenisation and digital settlement, while ensuring alignment between HM Treasury, the FCA and the Bank of England. For FMIs, this suggests a more interventionist policy approach, in which authorities do not simply facilitate innovation but actively seek to accelerate structural change in wholesale markets.

In practical terms, this increases the likelihood that issues such as interoperability, settlement finality in DLT systems and the treatment of digital assets within existing legal frameworks will be addressed more quickly – and with a view to enabling live market adoption rather than prolonged pilot phases.

Competitive positioning – UK vs EU vs US 

The UK’s approach must be seen in the context of global competition to lead in tokenised wholesale markets.

The EU has the most developed legislative framework for tokenised wholesale markets, underpinned by the broader Savings and Investment Union (SIU) – the EU’s flagship programme for integrating capital markets and improving their efficiency through technologies such as tokenisation (read more). 

The EU’s DLT Pilot Regime provides a defined route for DLT market infrastructures with time-limited exemptions from certain securities rules. Uptake, however, has been muted, due to operational complexity, caps on activity and time‑limited permissions, which can deter long‑term investment. MiCA adds regulatory completeness for crypto‑assets and stablecoins, but its prescriptive nature has raised questions about suitability for wholesale use cases. Overall, the EU framework offers clarity, but can be difficult to scale.

The US has seen strong private‑sector activity, supported by the Administration’s pro‑digital‑asset agenda and a shift towards enabling innovation, driving developments in tokenised funds and market infrastructure. However, regulation remains fragmented across federal and state levels, with overlapping agency mandates and divergent state licensing regimes, and continuing uncertainty around asset classification and jurisdiction despite recent SEC/CFTC guidance. While legislative momentum is increasing – including the GENIUS Act and progress on market‑structure legislation – the US still lacks a unified federal framework creating compliance complexity. 

The UK is positioning itself as principles‑based, coordinated and focused on production‑scale adoption. The Digital Securities Sandbox offers a controlled environment with a clearer pathway toward permanent authorisation. The appointment of the Wholesale Digital Markets Champion reinforces coordination across regulators, while payments reform is being advanced alongside market infrastructure changes – critical for FMIs given the importance of settlement assets.

The adaptability of English law and its global use further supports the UK’s positioning. Recent Bank of England and FCA engagement – including a call for input on wholesale market tokenisation – underscores a commitment to public‑private collaboration, equivalent treatment of tokenised and traditional assets, and alignment of prudential, custody and settlement frameworks. A roadmap is emerging, with further consultations expected through 2026–2027.

Looking ahead

The UK government has signalled a clear policy intent to support the development of digitally native financial market infrastructure in the UK. Success will depend on translating policy into operational reality. The Digital Securities Sandbox remains in early stages, and coordination across regulators, while improving, has not always been seamless.

For FMIs, the implications are strategic. The key question is no longer whether tokenisation and digital assets will scale, but how market structure will evolve as they do.

There are meaningful opportunities for infrastructure providers that adapt – shifting from operators of traditional systems to enablers of integrated, digitally native market services. Those that do not risk gradual erosion of their position as markets move toward real‑time, programmable and increasingly consolidated infrastructure.