Introduction
The UK’s tokenisation market is being shaped by a coordination effort involving 54 financial institutions, convened under HM Treasury’s Wholesale Digital Markets Champion and supported by the City of London. The taskforce is working to develop live use cases for asset tokenisation across bonds, funds, repo, and collateral markets. Barclays and PwC estimate that tokenisation could add up to £33 billion a year to the UK economy by 2035, though industry analysts caution that figure depends heavily on how the market is structured, not simply on whether tokenisation technology is adopted.
Central to that structuring question is interoperability: whether tokenised assets issued, held, and settled across different institutions and platforms can move between them without manual reconciliation. Isadora Arredondo, VP of global policy at Hedera and a participant in the Treasury taskforce, has argued that the central risk facing the UK market is not technical failure but fragmentation, a scenario in which multiple incompatible tokenisation platforms recreate the inefficiencies of the current financial system in digital form.
The outcome of this coordination effort matters for regulated financial institutions, market infrastructure providers, and policymakers assessing how distributed ledger technology integrates with existing settlement and custody systems.
What the UK Tokenisation Taskforce Is Doing
The Treasury-convened taskforce has moved beyond isolated pilot programmes toward testing tokenisation at production scale across a broader group of institutions. According to Arredondo, earlier pilots demonstrated that individual components, such as issuing and transferring bonds or funds via distributed ledger technology, could function on a single platform or among a small group of participants. Those pilots did not resolve shared market-wide questions, including ownership recognition, settlement finality, and operational accountability, which require coordination across the wider financial system rather than decisions made by individual firms.
Institutional interest has grown as firms assess tokenised funds, repo, collateral, and sovereign debt as mechanisms to reduce reconciliation costs and improve settlement efficiency. Policymakers involved in the taskforce have identified a coordination risk: absent a shared framework, institutions could independently build systems that prove difficult to connect later, entrenching fragmentation before common standards are established.
How the £33 Billion Estimate Would Be Realised
The £33 billion annual economic contribution estimated by Barclays and PwC is described by taskforce participants as a potential outcome rather than an automatic result of tokenising financial assets. Realising that value requires tokenisation to change the operational processes surrounding an asset, not merely change how the asset is represented digitally.
That means reducing duplicated recordkeeping, manual reconciliation, and settlement delays, according to Arredondo. It also requires tokenised assets to function as genuinely usable instruments, capable of being held, transferred, and pledged as collateral through the systems institutions already operate. Where transactions still require manual entry into accounting, custody, or risk systems, tokenisation adds a technology layer without removing the underlying cost base it is intended to reduce.
Key Factors Influencing Market Development — Interoperability as the Central Variable
Interoperability has been identified as the priority factor determining whether the UK tokenisation market develops as a connected system or a collection of separate platforms. In practical terms, interoperable infrastructure would allow an asset issued by one institution to be held by a second, used as collateral by a third, and settled by a fourth, without each participant needing to manually re-enter or recreate the transaction. Ownership records and compliance permissions would need to remain consistent as the asset moves between systems.
Achieving this requires legal and governance agreement among participants on which record is authoritative, when settlement is considered final, who is responsible for correcting errors, and how disputes between connected systems are resolved. Arredondo notes that industry discussion of interoperability has focused primarily on technical bridges between blockchain networks, when in practice interoperability must also cover custody, payments, identity, legal ownership, and reporting.
Bridge-Based Models vs. Bridgeless Protocols
The dominant technical approach to cross-network asset movement to date has relied on bridges and relayers, which industry participants describe as not yet resilient at scale and capable of introducing single points of failure. As an alternative model, Hedera’s ecosystem is developing CLPR, a bridgeless Cross-Ledger Protocol that establishes trust directly between ledgers using cryptographic state proofs, without an intermediary or pooled liquidity requirement. The protocol is designed to be chain-agnostic across major networks. Proponents position this approach as illustrative of interoperability infrastructure that allows secure asset movement between networks without weakening either network’s security assumptions, though the model does not require standardisation on a single network; multiple infrastructures are expected to continue operating in parallel.
Lessons from Australia’s Project Acacia
Australia’s Project Acacia programme is cited as a reference point for the UK taskforce, with the primary lesson being that new tokenisation infrastructure needs to connect with existing financial system rails rather than operate as a replacement for them. The programme tested how public and private distributed-ledger environments could function alongside regulated institutions and national payment systems, rather than assuming tokenised assets and digital money would displace established settlement infrastructure.
Project Acacia also demonstrated the value of involving regulators, financial institutions, payments providers, and technology companies within a single coordinated programme, given that many of the underlying questions concern shared market rules that no single provider can resolve independently. Analysts note that the UK cannot directly import Australia’s specific market design, since UK market structure differs, but the coordination methodology, testing how new systems interact with existing infrastructure, is considered transferable.
Costs and Risks of Market Fragmentation
Fragmentation across incompatible tokenisation networks carries direct technology, operational, and liquidity costs. Each incompatible network requires institutions to build separate connections, complete separate onboarding processes, and hold assets or liquidity across multiple environments. This can divide markets for the same underlying asset class: a tokenised asset that is easily transferable within one platform may be inaccessible to investors or custodians operating on a separate platform, producing fragmented liquidity pools and pricing.
Fragmentation risk compounds over time. Once platforms accumulate significant assets and users, unwinding that fragmentation becomes more costly, potentially requiring changes to legal documentation, investor consent processes, and the transfer of ownership records. Industry commentary frames the establishment of common technical and legal standards as significantly easier to achieve while infrastructure is still being designed than after individual platforms become commercially entrenched.
Risks and Limitations
Beyond fragmentation risk, taskforce participants have flagged the need for clarity on operational failure scenarios, including ownership recognition, settlement finality, and recovery processes when a platform or provider experiences an outage or failure. Financial infrastructure is expected to encounter operational exceptions, and current tokenisation frameworks have not yet been comprehensively tested against these scenarios at scale.
A further structural risk is commercial incentive misalignment: individual technology providers may have business incentives to retain users and liquidity within closed, proprietary environments rather than support open interoperability, which policymakers are expected to need to address through coordinated standards rather than relying on market forces alone.
Future Outlook
Milestones cited for measuring UK tokenisation progress over the next 12 months include a live, end-to-end transaction spanning issuance, custody, payment, and settlement across multiple regulated firms, integrated with existing accounting, risk, and reporting systems without extensive manual intervention. A second milestone involves demonstrated interoperability, meaning a tokenised asset accessible through more than one institution or infrastructure with consistent ownership and settlement records. Use cases involving digital gilts, tokenised repo, and collateral are viewed as particularly significant tests of whether tokenisation improves existing wholesale market functions rather than merely replicating them on new infrastructure.
Taskforce participants have also indicated that institutions will require a defined route from pilot testing into production implementation, including clarity on governance, funding, and regulatory treatment, before committing further investment at scale.
Conclusion
The UK’s tokenisation market is positioned for potential growth, with Barclays and PwC estimating a £33 billion annual economic contribution by 2035, but that outcome is contingent on structural decisions being made now rather than guaranteed by the underlying technology. Interoperability among institutions, platforms, and legal frameworks has been identified as the central variable determining whether the market develops as a unified system or fragments into disconnected pilots. The Treasury’s 54-institution taskforce, informed in part by lessons from Australia’s Project Acacia, is working to establish shared standards for ownership, settlement, and asset movement before individual platforms become commercially entrenched, a window industry participants describe as narrowing over time.
