HM Treasury’s Wholesale Digital Markets Champion has convened an industry taskforce, supported by the City of London, that has brought 54 financial institutions together to develop live tokenisation use cases. Barclays and PwC estimate that tokenisation could add up to £33 billion a year to the UK economy by 2035.
Isadora Arredondo, VP of global policy at Hedera, on the Treasury’s wholesale tokenisation taskforce,
Project Acacia and the real cost of a fragmented market.
The question the taskforce has to answer is not whether the technology works. It is whether the resulting market is one market or a collection of disconnected pilots. The Fintech Times put written questions to Isadora Arredondo, VP of global policy at Hedera, on why the coordination is happening now, what the Australian Project Acacia programme does and does not transfer to the UK, and what a fragmented tokenised market would actually cost.
The Treasury’s Wholesale Digital Markets taskforce has brought 54 institutions together to build live tokenisation use cases. Why has this coordination happened now, and what has changed to move tokenisation from isolated pilots towards production?
There’s much less debate now about whether the technology itself can work. We’ve clearly seen that it can. The hurdle now is implementation at scale: institutions have demonstrated that bonds, funds, and other assets can be issued and transferred using distributed ledger technology. We now need to demonstrate that these assets can function safely and seamlessly across the banks, payment systems, and market infrastructures that make up the financial system.
Previous pilots have been limited to one platform or a small group of participants. They proved individual components could work, but did not fully address shared questions such as ownership, settlement finality, and operational accountability. No single institution can define those arrangements for the wider market, and that's why we’ve seen 54 firms brought together.
Institutional demand has also become more practical which is why I think we’re seeing greater impetus for action. Firms are assessing tokenised funds, repo, collateral and sovereign debt as potential ways to reduce reconciliation, improve settlement and make assets more operationally useful. Policymakers recognise that, without coordination, institutions could invest in separate systems that are difficult to connect later.
The taskforce therefore provides an opportunity to develop shared approaches before incompatible models become entrenched. The key part now is getting participants to agree on how tokenised transactions should operate across different institutions, systems, and legal frameworks.
Barclays and PwC put the prize at up to 33bn pounds a year for the UK economy by 2035. What has to be true for that figure to be realised, and what is the biggest risk that it is not?
The £33 billion figure should be viewed as a potential outcome, not an automatic consequence of tokenising assets. We’ll only see the value if tokenisation changes the processes surrounding an asset rather than simply changing how that asset is represented.
What that means is reducing duplicated records, manual reconciliation, and settlement delays. It also requires tokenised assets to become genuinely useful: they must be capable of being held, transferred and used as collateral through the systems institutions already rely on. If transactions still have to be manually entered into accounting, custody, or risk systems, the industry will have added a new technology layer without removing existing costs.
The biggest risk is that the market recreates its current fragmentation digitally. Separate platforms could require different integrations, divide liquidity and make it harder for institutions to maintain a simple view of how they’re using assets. The economic opportunity depends on actually taking processes out of the system rather than adding new ones alongside them.
You have said interoperability is the priority. In practical terms, what does interoperable tokenisation infrastructure look like, and where is the industry currently getting it wrong?
In practice, interoperable infrastructure would allow an asset issued by one institution to be held by another, used as collateral by a third, and settled by another, without every participant having to recreate or manually re-enter the transaction. It also means that the things around the asset (ownership records and compliance permissions, for example) have to remain consistent as it moves.
This requires a level of legal and governance agreement from those involved. Participants need to know which record is authoritative, when settlement becomes final, who can correct an error and what happens if two connected systems disagree. A token moving successfully between networks is of limited value if the parties do not have certainty over what happens when there is a bottleneck or if something goes wrong.
I think we still tend to talk about interoperability primarily as a technical bridge between blockchains: can a token cross from blockchain A to blockchain B? In practice it has to cover much more than that, including custody, payments, identity, legal ownership and reporting. The dominant approach to date has been bridges and relayers, but these are not yet working resiliently at scale and can introduce single points of failure.
In the Hedera ecosystem, Hashgraph is developing CLPR, a bridgeless Cross-Ledger Protocol that establishes trust directly between ledgers using cryptographic state proofs, with no intermediary and no pooled liquidity requirements. Designed to be chain-agnostic across major networks, it points towards what genuine interoperability infrastructure should look like: secure asset movement between networks without weakening the security assumptions of either.
The answer is not necessarily to require every firm to use the same network; different infrastructures will continue to exist. But those networks do need to talk to each other far better than they do today. Institutions should still be able to choose the environment appropriate to their needs (private or public) while maintaining secure asset movement, consistent data, clear accountability, and regulatory control across the wider market.
What are the specific lessons from Project Acacia in Australia that the UK should adopt, and what would not transfer to this market?
The most important lesson from Project Acacia is that new digital infrastructure must connect with the financial system institutions already use. The project was built around the reality that tokenised assets and digital money would not replace established payment and settlement infrastructure overnight. Instead, it explored how public and private distributed-ledger environments could operate alongside regulated institutions and existing national payment rails.
That ethos should be applied to the UK. Institutions are more likely to adopt tokenisation where it can be introduced within existing custody, compliance and settlement arrangements rather than requiring an entirely separate market. That is broadly what the taskforce is trying to do.
Acacia also demonstrated the importance of involving regulators, financial institutions, payments providers and technology companies in the same programme. Many of the critical questions concern shared market rules and cannot be resolved by one provider alone.
What does not transfer directly is the exact market design. The UK’s market is structured differently, so the useful lesson is the way Acacia tested how new systems interact with existing infrastructure, rather than the precise model it used.
If banks and market infrastructures build on separate, incompatible networks, what does that fragmentation cost in real terms, and is there a point after which it becomes hard to unwind?
Fragmentation creates direct technology, operational and liquidity costs. Every incompatible network requires institutions to build another connection, complete another onboarding process, and hold assets or liquidity in another environment.
It can also divide the market. A tokenised asset may be easy to transfer within one platform but unavailable to investors or custodians using another. That can produce separate pools of liquidity and pricing, reducing the usefulness of the asset and making it harder for firms to maintain a consistent view of their operations and finances.
Fragmentation becomes even more difficult to unwind once platforms have built up substantial assets and users. Institutions may also have invested in technology, governance processes and commercial relationships that they’re reluctant to replace. On top of all this, migrating assets could require changes to legal documentation, investor consent, or the transfer of ownership records. Once those costs start stacking up, you can see how interoperability becomes an expensive corrective exercise rather than a principle built into the market.
This is why it makes sense to address common standards now. Choice and competition are important, and this isn’t about mandating one network. But we do need to make sure that different systems can exchange information and support asset movement without losing legal certainty, regulatory control, or operational ease of use.
It is much easier to establish common interfaces while infrastructure is still being designed than after individual platforms have become commercially or operationally important.
What should success look like over the next 12 months, and which milestones would tell you the UK is on track to lead in institutional tokenisation?
Success should be measured by whether the UK progresses from individual demonstrations towards repeatable market activity. The next 12 months should establish operating models, standards and infrastructure that other institutions can reuse.
A meaningful milestone would be a live, end-to-end transaction involving several regulated firms, covering issuance, custody, payment, and settlement. It should connect with existing accounting, risk and reporting systems without relying on extensive manual processes outside the digital platform.
A second milestone would be evidence of interoperability. An asset should be accessible through more than one institution or infrastructure, with consistent records of ownership and settlement status. Work on digital gilts, tokenised repo and collateral will be particularly important because these use cases test whether the technology can support core wholesale-market activity. Because we already know how these markets work today, we should be able to see whether tokenisation is actually improving them or just re-creating them on different infrastructure.
The taskforce should also provide greater clarity on ownership, settlement finality, operational responsibility and recovery when a platform or provider fails. Things go wrong all the time, and infrastructure must be designed for exceptions and outages, rather than expecting a successful execution every time.
Finally, there needs to be a route beyond the programme. Institutions need confidence that this work can move into real-world implementation before they commit serious investment. That means clarity on governance, funding, and regulation, and opportunities to keep putting the infrastructure into practice.
What single decision, regulatory or technical, will most determine whether the UK
captures this opportunity?
The most important decision is whether the UK makes interoperability a core requirement of the market’s design from the beginning. We need to establish technology-neutral expectations that tokenised assets must be moveable, legally recognisable and usable across different institutions and infrastructures.
Those expectations also need to go beyond network connectivity. There will need to be agreement on ownership, settlement, and compliance, as well as the technical foundations.
Regulators and policymakers have an important role because individual providers may have commercial incentives to keep users and liquidity within closed environments.
Requiring common standards as projects move from sandbox testing into wider production would help align private incentives with the needs of the market. These incentives are always going to exist but policymakers will need to help participants find common ground.
Getting this right would allow different technologies and business models to compete while preserving a connected financial system. We’re still at an early stage, and the market is going to keep moving quickly. That’s why it’s so important that a technology choice made today does not prevent an asset from participating in the wider market tomorrow.
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