What are the common challenges startups face in equity tokenisation?

The most common challenges include navigating FCA regulatory requirements, selecting the right tokenisation platform, structuring the legal framework for tokenised equity, educating investors unfamiliar with digital securities, and ensuring compliance with the UK Digital Securities Sandbox rules.

What are tokenisation platforms and how do they work?

Tokenisation platforms are regulated technology providers that convert equity or other assets into digital tokens on a blockchain or distributed ledger. In the UK, platforms operating under FCA oversight include those participating in the Digital Securities Sandbox. They handle the technical issuance, custody, and transfer of tokenised securities.

What financial insights should founders know before tokenising equity?

Founders should understand the cost structure of tokenisation (legal, platform, and compliance fees), the valuation implications of fractional ownership, how tokenised equity differs from traditional equity crowdfunding, and the tax treatment of digital securities under UK law.

What investor strategies apply to tokenised equity?

Investors in tokenised equity can benefit from fractional ownership of high-value assets, improved liquidity through secondary market trading on regulated platforms, portfolio diversification across early-stage UK startups, and participation in deals previously accessible only to institutional investors.

What is the UK regulatory landscape for equity tokenisation?

The UK regulatory landscape is governed primarily by the FCA (Financial Conduct Authority) and HM Treasury. Key frameworks include the Financial Services and Markets Act 2023, the Digital Securities Sandbox (DSS), and ongoing FCA consultations on the treatment of tokenised securities. The UK is positioning itself as a global leader in regulated digital securities.

What is equity tokenisation?

Equity tokenisation is the process of converting ownership rights in a company into digital tokens recorded on a blockchain or distributed ledger. These tokens represent shares or equity stakes and can be transferred, traded, or held digitally, subject to regulatory compliance. In the UK, tokenised equity is treated as a regulated financial instrument under FCA oversight.

Shout Now! The UK's Tokenisation Consultation Closes on 3 July. Here Are the Questions Founders and Their Advisers Should Be Answering.

Shawn Jhanji
Jun 26
5 min read

The Bank of England, the Financial Conduct Authority and the Prudential Regulation Authority asked the market a very large question in May, and the window to answer it closes on 3 July.

Their joint Call for Input, titled The Future of Tokenisation, sets out a shared vision for how tokenised assets should be issued, traded and settled across UK wholesale markets. Most of the early responses have come from banks, custodians and infrastructure firms. The people with arguably the most to gain, founders raising their first or second round and the advisers who guide them, have been quieter. With a week to go, that is worth correcting.

This piece is written in our open question mode. We are not claiming to have every answer. We are laying out what appears to be settled, what is genuinely unresolved, and where we think founders and their advisers should be pressing the authorities for clarity. It is general information and an open editorial question, not tax or investment advice, and we flag clearly where HMRC and the regulators have not yet ruled.

What is already on the table

The UK has quietly assembled most of the pieces. The Digital Securities Sandbox, run by the Bank and the FCA, now has a cohort of firms working towards live issuance and settlement of tokenised instruments. HM Treasury is running its DIGIT pilot to issue a digitally native gilt, with HSBC appointed to provide the distributed ledger platform earlier this year. And PISCES, the Private Intermittent Securities and Capital Exchange System, has moved from policy to practice: Vestd, the London Stock Exchange, JP Jenkins and Asset Match are all approved to run intermittent trading windows for private company shares, and JP Jenkins completed the first live PISCES liquidity event in March.

The Call for Input is the connective tissue. It asks how these experiments should harden into permanent market structure, what the long term settlement model looks like, and how tokenised securities should sit alongside the traditional plumbing rather than beside it. For wholesale markets the questions are technical. For founders, they are strategic, because the answers will shape who can raise, from whom, and on what terms.

The settled position on SEIS and tokenisation

This is the theme we believe the publication should own, and it is the one most likely to be left out of the consultation responses unless founders and seed specialists put it there.

Start with what is settled, because a surprising amount is. The three year holding period attached to SEIS and EIS is a condition of the tax relief, not a legal lock on the shares. An investor is free to sell sooner; they simply forfeit the relief on the shares they sell.

It appears that tokenised seed shares can retain SEIS status where the underlying ordinary share is issued and filed in the conventional way, company registers remains the source of truth, and the token operates as a tradable representation of a legal holding sitting in a compliant nominee or custody structure. None of that is exotic. It is existing company law with a digital wrapper.

What tokenisation changes is the liquidity horizon. Paired with PISCES trading windows, a tokenised seed share can compress the realistic route to liquidity from the traditional seven to ten years down to as little as three, by placing the first trading window at or beyond the three year point so that early backers can sell without sacrificing their relief. Liquidity is enabled, not guaranteed; a window is only as useful as the buyers who turn up.

But the structure is sound, and for a seed investor weighing a long lock up against an early stage risk, the difference between a decade and three years is the difference between a yes and a no. That loops directly back to founder access: the easier it is for a backer to exit responsibly, the more freely capital flows to the founder in the first place.

SEIS itself remains the most generous early stage incentive in the UK, possibly globally, offering up to fifty per cent income tax relief on investments in companies under three years old. A company can raise up to 250,000 pounds in total under the scheme. It was left unchanged in the Autumn 2025 Budget even as EIS company limits were widened from 6 April 2026, which tells you the Treasury sees SEIS as already well calibrated for the earliest companies.

HMRC data published in May showed 2,430 companies raised 276 million pounds under SEIS in the most recent year, up 14 per cent. This is not a niche relief. It is the deciding factor in a large share of seed rounds, particularly for founders with no warm network to fall back on.

The genuinely open question

Here is where we stop asserting and start asking, because this is the part the consultation can actually move.

The open question is implementation.

Q. How exactly does a tokenised share ledger reconcile with a company register and Companies House in practice, in real time, without creating two competing records of truth?

Q. What nominee and custody structures satisfy both HMRC for relief purposes and the FCA for market conduct?

Q. And what would formal HMRC guidance say, given that advance assurance and the Venture Capital Schemes Manual were written for a paper world?

Live pilots are being built to prove the model, but a pilot is not a published position. Until HMRC sets out, in writing, how it views tokenised SEIS and EIS shares, advisers are reading across from first principles, and founders are carrying uncertainty they should not have to.

That is precisely the gap a consultation response can name. The FCA and the Bank cannot speak for HMRC, but a coordinated body of responses pointing at the same unanswered question is how an unanswered question becomes a workstream.

A call for comment

So this is an open invitation, addressed to the people who live these questions in real rounds. We invite you to have your say. The link is here:

https://www.fca.org.uk/publications/calls-input/future-tokenisation-joint-vision-authorities-uk-wholesale-markets

Share your thoughts, needs and perspective. They matter, whether you agree or disagree with our assessment. What is the one piece of clarity on tokenised seed equity that the UK authorities should deliver this year?

We're asking the SEIS and EIS specialists, we are asking the digital securities lawyers, we are asking the PISCES operators. And we are asking founders and investors, who have weighed up a tokenised structure for a real raise. Have a say - share your voice!

The consultation closes on 3 July. The questions it leaves open will shape the next decade and beyond, of how UK businesses access capital, raise and scale.

We believe this is a rare moment when the people building and investing in companies, rather than the people building infrastructure, can be heard. It is worth the email.

Key Takeaways

The FCA, Bank of England and PRA joint Call for Input on the future of tokenisation closes on 3 July 2026, and founders and their advisers have so far been underrepresented in the responses.
The SEIS and EIS three year period is a condition of relief, not a legal lock on the shares, and tokenised seed shares can retain SEIS status where Companies House remains the source of truth.
Tokenisation paired with PISCES windows can compress the realistic liquidity horizon from seven to ten years down to as little as three, without sacrificing relief, which makes early backing more attractive and capital more available to founders.
The genuinely open question is implementation: how a tokenised ledger reconciles with Companies House, what custody satisfies HMRC and the FCA, and what formal HMRC guidance would say.
This is general information and an open editorial question, not tax or investment advice. We invite named specialists, lawyers, PISCES operators and founders to respond on the record.