ClearToken wins Bank of England approval in sandbox

ClearToken has been approved by the Bank of England to operate a Digital Securities Depository in the Digital Securities Sandbox, making it the first non-bank to pass the sandbox's Gate 2 stage.

The decision allows ClearToken CSD to issue and settle tokenised versions of existing securities within limits set by the central bank. Its live settlement service will initially cover FTSE 350 equities, GBP government debt, and GBP and non-GBP corporate bonds.

This places the group among a small number of firms permitted to run supervised market infrastructure for digital securities in the UK. It also gives ClearToken permission to handle tokenised equities and corporate bonds, as well as sovereign debt, which it described as a first for an approved Digital Securities Depository.

The model is designed to let institutions settle transactions continuously rather than through batch processes and end-of-day deadlines. ClearToken said this would allow eligible securities to be mobilised as collateral and used in intraday repo transactions on a 24/7 basis.

Its system uses the same ISINs as traditional securities so that digital and conventional forms of the same asset remain fungible. The aim is to avoid splitting liquidity into separate pools and to preserve existing ownership rights.

Launch scope

At launch, the approval is subject to custody limits set within the sandbox: GBP £600 million for gilts, GBP £900 million for GBP corporate bonds, and GBP £1.8 billion for non-GBP corporate bonds. Public equity limits remain unconfirmed.

ClearToken intends to seek further approval to extend the service in phases to other asset classes, including global public equities, private funds, physical commodities such as gold, and digital assets.

ClearToken is building its post-trade model across three regulated entities. ClearToken Depository is authorised by the Financial Conduct Authority as an Authorised Payment Institution and is also registered as a cryptoasset firm. ClearToken CSD has now secured Gate 2 approval, and ClearToken CCP has applied to the Bank of England to operate as a central counterparty.

The structure is intended to cover the securities leg of a transaction, cash movement, and the clearing of financing trades and derivatives within one post-trade framework. ClearToken described the approach as a way to combine functions that are often offered separately in digital asset markets.

Ben Santos-Stephens, Chief Executive Officer of ClearToken Group, said the approval marks an important step for the market.

"Our approval to operate a live DSD is hugely significant for the market. The biggest hurdle for institutional adoption of digital securities has not necessarily been the technology; it has been whether the infrastructure around that technology is sufficiently regulated, robust and legally recognised. Banks, asset managers and other market participants can now have confidence that digital securities can operate within a trusted, regulated post-trade framework alongside traditional financial assets," Santos-Stephens said.

Regulatory framework

The UK's Digital Securities Sandbox was created to let firms test new forms of digital market infrastructure under regulatory supervision. Gate 2 approval means ClearToken can operate in a live environment rather than remain at an earlier testing stage.

Akash Sharma, Head of Policy & Regulatory Affairs at ClearToken Group, said the approval shows how tokenised assets can be brought within a formal market structure.

"The UK has turned a tokenisation framework into a live, supervised market infrastructure where regulated institutions can settle assets carrying real rights. Institutions take their certainty from a rulebook, default arrangements and a named, accountable operator standing behind the ledger. That is what ClearToken CSD provides," Sharma said.

"We thank the Bank of England and the Financial Conduct Authority for a rigorous and proportionate process, and for their engagement throughout. Today's approval is evidence of the UK's commitment to innovation in financial markets," he added.

The approval does not remove all constraints. The Bank of England's acceptance of Tokenised Depository Interests as transferable securities is limited to the duration of the sandbox, and ClearToken noted that no permanent regime yet exists. It also said that until a Bank of England omnibus account is in place, participants using any commercial bank money arrangement, including ClearToken CSD's, bear settlement bank credit risk.

Santos-Stephens said the group sees market infrastructure, rather than issuance, as the main gap in tokenisation.

"The missing piece in tokenisation was never asset issuance, it was the market infrastructure behind it. Settlement, collateral mobility, and payments are the pillars that enable real-world adoption. Today, ClearToken is uniquely positioned, holding UK permissions for all three, with the cash leg already authorised, helping bridge the gap between digital innovation and regulated financial markets," he said.