Bank of England opens consultation on tokenized collateral for clearing

Central counterparties would need to show tokenized collateral meets liquidity and risk tests under proposed Bank of England guidance.

The Bank of England has opened a consultation on how a central counterparty (CCP) can accept digital versions of eligible collateral, saying existing rules allow it when assets meet clearing standards.

The draft supervisory statement would clarify what CCPs must address in applications under the current approval process. It covers collateral already accepted and types that qualify under the proposed UK CCP Rulebook but are not in use. The statement would not create new regulatory obligations.

The BoE said tokenized collateral must remain capable of being valued, transferred and realized, including in stressed conditions. Faster movement across jurisdictions could help firms meet margin calls, it said.

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