Series 8 Episode 5: Unlocking tokenisation: regulation, adoption and the future of financial markets

Transcript

Tessa Norman: Hi everyone, and welcome to this episode of Risk and Regulation Rundown, the podcast where we explore the latest issues shaping financial services risk and regulation. I’m your regular host, Tessa Norman, and today we’re talking about tokenisation. We’ll be exploring how the regulatory landscape is evolving, what’s changing in the market, and talking about the practical and strategic implications for firms across financial services.

I’m delighted to be joined by two fantastic guests, Laura Talvitie, who’s PwC’s Digital Assets Regulatory Lead and James Moseley, a PwC Banking Partner and Digital Assets UK Lead. Welcome both to the podcast.

James Moseley: Thanks Tessa, very excited to be here.

Laura Talvite: Thank you.

Tessa: Let’s start with the basics. Laura, can you tell us what do we mean by tokenisation in practice, and why is it getting so much attention at the moment?

Laura: In short tokenisation is about turning ownership of an asset into a digital token on a blockchain. That token can then be transferred and settled more efficiently and what’s driving the interest comes down to three key benefits. Cost, because you can reduce intermediaries and manual processes. Speed, because settlement can happen much faster, in some cases close to real time, and fractionalisation, which means you can split assets into smaller pieces and make them easier to distribute. There’s also an automation angle through programmability, where certain processes can be built into the asset itself. In summary, tokenisation changes how assets move through the system, not just how they are recorded.

Tessa: I imagine this is quite a fast-moving topic at the moment, since we last covered it on the podcast, which was back in November 2025, there’s been quite a bit of movement. What are the key recent regulatory developments that firms should be aware of?

Laura: Yes, a lot of movement in the UK. Once this episode is out, the FCA has issued its policy statement on fund tokenisation. So the regulatory clarity is progressing. And from the wider framework perspective, the FCA will issue their cryptoasset policy statements around mid-2026. In April, the FCA also came out with proposals to help firms to understand when crypto activities fall inside the regulatory perimeter and when authorisation is needed, and that gateway for authorisation opens in September 2026.

And from the Government side, HMT has put forward some targeted updates to the cryptoasset framework, mainly to clarify how stablecoin payments fit within existing payments regulation and when firms need additional permissions. And then they have also confirmed a broader shift, which is bringing payments and e-money fully into the FSMA framework. So, over time you move towards a single regime covering both traditional and tokenised forms of money. That is important in practice because many tokenisation use cases depend on how the cash side works. And the government has also launched a call for evidence on the taxation of stablecoins. The direction of travel is important. If stablecoins start to be treated more like money for tax purposes, rather than investment assets, that could remove a lot of friction, especially if it reduces capital gains tax issues on everyday transactions. Overall, it feels more practical now, and firms really have a clear base to start from.

Tessa: So, given that we are gradually seeing that greater clarity from a policy and regulatory perspective, James, it would be great to get your thoughts in terms of what is the biggest shifts you’re seeing in terms of market adoption?

James: Thanks Tessa. Keeping pace with that regulatory agenda which is moving ahead so incredibly fast, and what you said about how that’s evolved since the last podcast. The same with market adoption and is moving incredibly fast. For a long time, regulators have got a bit of a bad rap and being the centre of blame for the lack of progress in the UK. I don’t think that holds up scrutiny anymore. There’re still some regulatory pieces of the puzzle and some legal clarity that needs some work, but that’s not in the way and it’s no longer an obstacle to firms getting on with adopting and growing these. I guess where we are, though, is we've got a huge number of proof of concepts. We've got a huge number of pilots. We've got a huge number of people in sandboxes. What's happening now is we're seeing it's time to move out of the sandbox, actually scale solutions, work on live transactions. We're seeing the sponsorship change in a lot of large traditional financial organisations where this is becoming a C-suite agenda topic and critical to a firm’s strategy. And we're seeing the competitor pressure. And that's not just traditional competitors, banks versus banks and races across asset management. It's Challenger banks, incumbents, people who can now enter these markets, and fundamentally take value away from the traditional players quickly. There's still stuff that has to happen though. And beyond that small amount of regulatory legal clarity, I think it's a degree of more purposeful investment around use cases that actually matter, have value and create consumer outcomes. And working out where industry regulators, governments need to come together in a more interventionist way to build infrastructure collectively as opposed to rely on the competition dynamics of capital markets and do things on their own.

Tessa: And as firms continue to progress those use cases and solutions, Laura, it would be interesting to hear your perspectives in terms of how does that look different across the different sectors in financial services?

Laura: It’s playing out quite differently across sectors. In banking the focus at the moment is mainly on fixing inefficiencies in the system. Tokenised deposits, collateral and settlement are all about freeing up liquidity, reducing capital drag, and improving how balance sheets are used. It’s also about making sure they remain central as the market structure starts to shift. In asset and wealth management, it’s almost the opposite. The bigger opportunity is on the client side. Tokenised funds and assets can change how products are distributed, who can access them, and how frequently they can be traded. Combined with fractionalisation, that starts to open up private markets in a more meaningful way. In insurance, the shift is more structural. It’s less about distribution and more about how contracts work. If parts of underwriting claims or reinsurance can be automated using programmable triggers, you can reduce friction and potentially improve how risk is transferred. And then you have crypto native firms, where tokenisation is not an add-on, it’s the starting point. So they are building new infrastructure, products and markets directly on chain, often moving faster and experimenting more with new models. It’s about where the main use cases are emerging today, and that is why firms are approaching this in quite a different way.

Tessa: So, thinking about some of those different approaches and impacts, James, if we were to see tokenisation develop at scale, where do you see the biggest opportunity, and who do you think stands to benefit most?

James: It's a great question. Ultimately, I think tokenisation of the UK markets of scale will have been a failure if the ultimate beneficiary isn't the consumer. At the end of the day, the biggest benefits to this will be ubiquitous 24-7 democratised access to investment products for consumers. Faster, easier payments and ultimately better cash management and an improvement to an average household's ability to manage and spend their wealth. That said, clearly there are benefits and risks to all sorts of parts of the ecosystem. I think there’s the obvious related to sort of your earlier question around adoption, where there is a race, there is a high degree of competition here and the more visionary use case centric players that land on solutions faster and get them to market will win out and will eat into other people's business. But I think fundamentally there's also rewiring of how financial services work. So, we're suddenly going to get a huge amount of distance mediation, new players, potentially some of the infrastructure providers or processes or middle layers of various parts of financial product transmission will see their businesses fundamentally shift or get dislocated. And I think it's also important to say that there's going to be a convergence across industries and sectors. This isn't purely financial services. We're going to see corporates play bigger roles in payments infrastructure in internalising things that they used to rely on financial services firms for and having more of a direct interaction with customers through digital money and digital products.

Tessa: And where do you see that leaving incumbent firms? Do you think they're still likely to have an advantage over new entrants?

James: I think there's always an incumbent advantage in terms of the sheer weight of balance sheet, investment, share capital, access, the question is, can they move fast enough? So, incumbents absolutely have the right to win in this market. And I also think in all realism, whatever forecast you look at in terms of the adoption of digital assets, whilst I'd love to believe in a seismic shift where everything's fully tokenised in the next ten years, we're going to see a gradual move towards that. And we're still going to have cash in our wallet in ten years. And that's still going to be part of a financial ecosystem. So incumbents have an edge in terms of investment if they move fast enough, but they also have an edge in terms of being able to play in traditional financial services and the future of financial services at the same time and actually knitting together that legacy and new DLT based infrastructure is going to be critical to some of their success. Where new entrants are stronger is the speed, agility and the ability to produce and take tech into the market incredibly fast. And I don't really see big incumbents matching that. What is going to happen is they're going to settle into a new ecosystem where value shifts to very different parts and the traditional business model of a bank or an asset manager today will not have the same constituents in 10 years time.

Tessa: So with both incumbents and new entrants are navigating that potentially fundamentally changing ecosystem. Laura, what are some of the key risks and challenges that they'll need to work through?

Laura: There are a few areas firms need to think about. Operationally, you are introducing new technology and new dependencies, which brings governance and resilience questions. Legally, there's still some uncertainty, as James has mentioned, especially when you look across different jurisdictions. And then there is the risk of fragmentation if different platforms do not connect properly. You also have the usual conduct and financial crime considerations. What tends to slow things down though is when it is treated as a tech project. The firms that are moving are the ones trying things in practise and getting legal and risk involved early, not at the end.

Tessa: And you mentioned different jurisdictions there. I'd be really interested in your take on how the UK's approach compares internationally and whether that's either helping or hindering firms?

Laura: The UK is still in a strong position, but the gap is closing. We make this point quite clearly in our ‘No time to lose’ report. For those who haven’t seen it, it’s a report we published with TheCityUK on the future of financial services. The UK has the fundamentals, but other financial centres are moving faster, particularly on technology and market infrastructure. Tokenisation is an example area where the UK needs to lead, not follow. Globally, the EU has frameworks in place, Singapore and Hong Kong are running coordinated pilots, and the US is seeing strong private sector momentum. What they have in common is that they are moving into real activity, not just policy. The UK is starting to shift, which is positive, and it feels more positive. But the key message is that execution now matters more than strategy. There is a real opportunity here, but it depends on pace. If the UK moves quickly, it can capture it. If not, activity will move elsewhere.

Tessa: And James are there any lessons or examples that you'd highlight from other jurisdictions that the UK firms could potentially learn from?

James: Yes, I think it's important to note that all jurisdictions are taking quite fundamentally different approaches to this, certainly when you look beyond the skin of the PR. There are clear perceptions that some jurisdictions are moving faster than others, but the reality is they're moving faster on some things than others, but not on everything. I think the three lessons the UK should consider learning and adopting. One, the progress comes from working towards a goal of a real scales use case that's alive and commercially beneficial, not getting stuck forever in experimentation and sandboxes. The UK has led a lot of the world in terms of sandboxes in relation to digital assets. Other jurisdictions have followed and struggled to get out the sandbox. We need that path out and we need a bias towards action and implementation. I think the other thing is, and this needs to work into our national and regulatory psyche, is there's a balance to strike between an interventionist coordinated approach to this and a complete capitalist approach to allowing business to innovate and compete and work through solutions. It's not easy to work out where you strike that balance, but there have been examples in other jurisdictions where a degree of standardisation and a degree of central investment in infrastructure has capitalised innovation. And equally, there have been examples where that's held it back. And if we work out the right balance between those two things in the UK, we'll make insurmountable progress. And I think that the final thing I'd say is PR. So, what we as understated British people have always been bad at in this space is talking through the benefit and the structure and the rigour of what the UK system provides in terms of a platform for scaling tokenisation. Some other jurisdictions, even overtly so and with funding, have been on a PR mission to attract business to those jurisdictions. That doesn't mean they have a more robust, more sophisticated or more mature regulatory framework or sort of innovation culture. It just means they're spending the time appropriately talking up the jurisdiction. So, we've got to get on the front foot with that, and we've got to do that in a balanced and British way.

Tessa: Absolutely, and I think if we bring it back down a level now, as we come towards the end of our conversation, I think we've talked about a lot of change and complexity that firms are having to navigate. It'd be great to get both your perspectives on what are the key sort of practical decisions that firms need to make. What should be their top priorities at the moment?

Laura: I‘d focus on three things. Be clear on your role in the value chain. This is going to reshape who does what, so you need to decide where you want to play. Second, focus on commercially viable use cases. Everything can be tokenised, but it doesn’t mean that everything needs to be. Prioritise and focus on the killer use cases. And finally, invest in operating model readiness, that means governance, legal, risk and infrastructure, not just technology.

James: I'd echo very similar sentiments, Laura, but I think for me and simplifying it, the three priorities for me are have a strong view and a vision of what you want to be when you grow up in the new world. And I think that is fundamentally looking at that role in the ecosystem, how your business is going to change and how frankly you want to be differentiated in a tokenised environment. There's something about how you get there and how you get there isn't always going down the extreme of, I'm going to build everything myself and be the innovator and incubate all the solutions, nor is it the extreme of, I'm just going to buy up a couple of investments in smart companies and hedge my bets. I think depending on the use case and the individual firm's business model and where they want to head in that strategic vision, they need to build by partner in different ways within this new Web 3 ecosystem that operates in a very different manner to what we're used to in traditional finance and technology. The other thing is to inject a degree of urgency on the things that need to be done earlier and a no-brainer enablers. So as an example, right now, I think every FS firm needs not just a clear strategy to deal with digital money, but to be moving forward with conviction in terms of enabling their operating model, processes, people to deal in digital money with their clients.

Tessa: Brilliant, thank you both very much for joining this conversation today. Lots of homework and lots of takeaways there for firms. One of the key things I’ve really taken away from this is that we’ve now got a clear direction of travel. Yes, there’s still some things to work through but there is a real sense of urgency, as you said James, for firms to be making the right decisions now about where and how they want to play, what use cases they are going to prioritise, in order to ensure they are maximising value and positioning themselves effectively for the future.

If you’d like to find out more about tokenisation and what it could mean for your business, please do get in touch, we’d be keen to continue the conversation. And if you enjoyed this episode, please subscribe and consider leaving a rating or review, as it helps other listeners to find us. Thank you for listening and speak to you again next time.