Bank of England: Tokenization Can Cut Costs

The Bank of England is increasing its focus on digital money, with Deputy Governor Sarah Breeden emphasizing tokenization as a potential way to lower costs, accelerate settlement times, and encourage greater competition in financial markets.

Speaking at City Week in London on Tuesday, Breeden said tokenization — the process of representing assets and money on digital ledgers — could improve the efficiency and functionality of payments and markets, provided trust and interoperability remain intact.

Breeden reiterated that central bank money would continue serving as the foundation, or “anchor,” of the monetary system, even as private-sector solutions such as tokenized deposits and regulated stablecoins gain momentum. She added that the central bank is collaborating with regulators, government bodies, and industry participants to create a framework that supports innovation while maintaining financial stability.

“Alongside traditional bank deposits, people should be able to pay with tokenized bank deposits, regulated stablecoins and, potentially, a retail central bank digital currency (CBDC),” she said, according to a transcript of the speech. “More competition, from a wider range of technologies and business models, should lower costs and improve functionality for users.”

Earlier this year, the BoE’s CBDC Academic Advisory Group stated that “retail CBDC is not strictly required to preserve uniformity, but may play a valuable supporting role, particularly as transactional use of cash declines.”

Bank of England considers modernization of settlement systems

The UK is also taking broader steps to prepare financial infrastructure for tokenized assets. On Monday, the Bank of England proposed extending the operating hours of its core settlement systems to near 24/7 availability.

According to the proposal, longer operating hours could better support cross-border payments and securities settlement as tokenization and digital asset technologies continue to evolve. The initiative follows comments from Breeden earlier this month indicating that the central bank is reassessing its approach to pound-denominated stablecoins, including whether restrictions on consumer holdings should be eased.

UK softens stance on stablecoins and digital assets

The review aims to reduce friction for early adopters while strengthening the UK’s position as a competitive hub for digital assets. In recent months, the Bank of England has adopted a more flexible approach toward stablecoins as officials engage more closely with industry groups and reconsider earlier proposals that would have introduced stricter reserve and backing requirements.

The shift suggests policymakers are seeking a balance between encouraging innovation and maintaining safeguards around financial stability as tokenized assets become a larger part of the financial ecosystem.

Sources:

https://www.bankofengland.co.uk/speech/2026/may/sarah-breeden-speech-at-city-week-the-future-of-money-in-a-digital-world

https://www.bankofengland.co.uk/paper/2026/cp/extending-rtgs-and-chaps-settlement-hours-next-steps

https://www.bankofengland.co.uk/minutes/2026/january/cbdc-academic-advisory-group-january-2026

https://cointelegraph.com/news/boe-breeden-sees-value-supporting-tokenized-uk-markets