Hogan Lovells and TheCityUK Progress report: Implementing the recommendations of our ‘Digitalisation of UK capital markets’ report

As Sharon Lewis, Lead Partner for Future of Finance and Co-Chair of the Digital Assets & Blockchain Practice at Hogan Lovells, notes, “While momentum is building and legal certainty around the use digital assets is growing, some urgent priorities remain to ensure the UK maintains its status as a world leading financial centre. Other jurisdictions are also moving to rapidly put in place legal frameworks to increase their attractiveness as global centres for finance and technology.

“We were very pleased to work with TheCityUK to take stock of the impressive list of key actions taken this year by UK authorities and industry stakeholders to advance digitalisation of our capital markets. But we must not be complacent. So the progress report also sets out what government, regulators, industry, and the Digital Markets Champion can do next to help unlock enormous savings and deliver long-term growth for capital markets and the wider economy.”

Key takeaways from the report

1. Increased Legal Certainty

The UK Property (Digital Assets etc) Act 2025 is now in force. HM Treasury (HMT) and the regulators have set out a series of detailed proposals (and a final framework statutory instrument) for regulating certain cryptoassets and stablecoins. While some aspects of the regime are yet to be finalised, we are beginning to see a clearer picture of the overall framework. Industry should engage with the latest consultations in order to shape the future of UK digital capital markets.

2. Proactive policies encourage digitalisation

The UK is attracting a growing number of diverse participants in its Digital Securities Sandbox. HMT is advancing the procurement process for the UK Digital Gilt Instrument (DIGIT) and seeking to foster secondary use cases and encourage additional functionality that enables collateral mobility.

The FCA has opened a stablecoin sandbox and the FCA and Bank of England have consulted on their approach to stablecoins and are participating in various experiments aimed at exploring interoperability, DLT use cases and moving central bank money ‘on chain’ and across borders. Such proactive measures will help to grow confidence in the UK policy approach to digital assets.

3. Industry Standards and collaboration are critical

The need for industry standards to support interoperability has been noted in policy statements. Adoption of standards like the ICMA Bond Taxonomy and Common Domain Model is accelerating, with endorsement from regulators and international bodies. The government’s Digital Markets Champion should work with industry to promote the use of industry wide standards across primary and secondary markets, as this will be key to building market confidence.

4. Tokenised Assets and Collateral

The original report called for clear pathways to digital bond issuance, custody and transfer. It also suggested that the National Wealth Fund could be used to promote private sector investment in tokenisation. It sought clarification on collateral arrangements, and eligibility of digital securities as collateral. The importance of standards, the need to identify use cases, the promise of fund tokenisation and collateral mobility have been noted in overarching policy statements and consultations. The case for collateral mobility was also made by the recent Global Digital Finance led pilot on Tokenised Money Market Funds. There is still a need to provide statutory clarity on collateral arrangements under the Financial Collateral Arrangement Regulations (and collateral eligibility under UK EMIR), especially as other jurisdictions are moving to attract tokenisation, including by facilitating collateral management. Regulators could helpfully provide guidance that the act of tokenisation in itself does not change the eligibility criteria of an asset for use as collateral.

5. Capital Markets are global

Frictionless global digital capital markets could deliver £billions of savings and growth. Regulatory fragmentation could however hinder digitalisation efforts, so international collaboration is vital – this might range from common taxonomies to outcomes based equivalence or mutual recognition. The UK and US have launched the Transatlantic Taskforce for Markets of the Future, including digital markets, and there is growing collaboration between the UK and Singapore (e.g. Project Guardian). The EU and UK also engage in regular dialogue on financial services. The Digital Markets Champion should work with HMT and industry to join the UK sector up with other jurisdictions to facilitate global collaboration. The Digital Markets Champion should also look for opportunities for UK authorities and industry to work with international bodies, for instance to establish interoperable pathways to digital bond issuance, custody and transfer. HM Treasury should consider amending the Digital Securities Regulations to allow, in principle, for international participants in the sandbox.

Authored by Sinéad Meany and Sharon Lewis.