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.

UK Finance Warns Britain Is Behind on Securities Tokenisation and Sets Three Missions to Close the Gap

Luca Bellavita
Jul 6
5 min read

For anyone building in tokenisation in Britain, the hard question has never been whether the technology works. It is whether the UK will be a place worth building it in. A new report from UK Finance, the industry body for the country's banking and finance sector, offers an uncomfortable but useful answer. On 6 July it published Unlocking the power of securities tokenisation, a study it commissioned from the consultancy Oliver Wyman, and the central finding is blunt.

The UK is behind other jurisdictions on securities tokenisation, though not irrecoverably so.

That verdict matters to a founder or investor who has never touched a wholesale bond desk, because the rails being argued over here are the same rails that private company equity and startup secondary trading will eventually run on. Get the plumbing and the standards right for gilts and funds, and the cost of doing the same for a tokenised cap table falls. Get them wrong, and the UK spends the next decade importing infrastructure and standards written elsewhere.

What the report actually says

Securities tokenisation, in the report's framing, is the digital representation of real financial assets using distributed ledger technology and smart contracts.

The claimed benefits are by now familiar:

faster and even near-instant settlement,
a reduction in counterparty risk because fewer intermediaries sit between trade and completion, and
the fractionalisation of assets that can widen access to markets that were previously the preserve of large institutions.

Taken together, UK Finance argues, these gains would strengthen the competitiveness of UK capital markets.

The problem is that potential is not the same as delivery. The report, built on interviews with government representatives, senior industry figures, heads of digital and legal experts, sets out to answer three questions: where the UK stands today against other jurisdictions, why tokenisation and the UK's position on it matter, and what the country should do next. Its honest conclusion is that the UK has real strengths, notably its internationally respected common law, but that there have not yet been any major tokenised issuances in the country while other financial centres have moved.

The gap is real. The report's more optimistic point is that it is a gap the UK can still close if it acts across the whole trade lifecycle, not just at the moment of issuance.

The three missions

The report organises its recommendations into three missions, split across a short term of the next 18 months and a medium term of 18 months to five years.

The first is to enable innovation and experimentation underpinned by legal and regulatory certainty. Here the report points to a successful roll-out of the Financial Market Infrastructure sandbox and, crucially, an actual issuance of a digital gilt as the proof points that would move the UK from talk to demonstration. That last item is not hypothetical: HM Treasury's digital gilt pilot, known as DIGIT, has already selected a platform provider and is designed to run inside the Bank of England and FCA's Digital Securities Sandbox.

The second mission is to foster a genuine UK digital market by promoting interoperability and safe innovation at scale. This is the part the market tends to underestimate but these are conversations that have started to take place recently between several EU based platform providers and issuers. Progress depends less on any single clever platform and more on unglamorous national infrastructure and, above all, shared and agreed standards for tokenised securities. Without common standards, every issuer builds an island, and liquidity never arrives.

The third mission is the most ambitious: for the UK to become a leader in setting global standards for the tokenised securities market, by convening international jurisdictions rather than waiting for them. A common law jurisdiction with London's convening power is well placed to do this, but only if it has something working at home to point to first.

What it means, and where we would push

The report deserves credit for resisting the industry's favourite shortcut, which is to treat a single headline issuance as evidence of arrival. Its insistence that value lives across the entire trade lifecycle, from issuance through settlement to servicing and secondary trading, is the right frame. A tokenised bond that still settles through the old machinery has changed the wrapper and little else.

The one place the report is necessarily quiet is timing, and this is where founders and investors should pay attention. The 18-month short-term window is short. It runs against a backdrop in which the United States saw two rival tokenised equity models launch on a single day in early July, and in which large asset managers have already put natively tokenised, UK-regulated funds onto public chains. The direction of travel is not in doubt.

The open question is whether the UK issues a digital gilt and lands its standards work before the default rails and conventions have already hardened around other centres. Momentum, once lost in market infrastructure, is expensive to recover.

For the private markets audience that this publication serves, the read-across is straightforward. The wholesale story and the founder story are converging. National infrastructure and agreed standards for tokenised securities are exactly what a credible market for tokenised private company shares, and for PISCES-style secondary trading of them, will eventually need. A UK that leads on the first will find the second far easier to build.

An open question worth putting to the market

UK Finance frames this report as the beginning of a dialogue, and we would take it at its word. The question we would put to the legal community, to the PISCES operators, to the tokenisation platforms and to the standards bodies is this: what single, concrete standard or piece of national infrastructure, if agreed in the next 18 months, would do the most to make tokenised securities interoperable in the UK?

We would welcome considered responses, on the record, from the people building this. This piece is general information and an open editorial question, not investment or legal advice.

Key takeaways

UK Finance's 6 July report, written by Oliver Wyman, concludes the UK is behind other jurisdictions on securities tokenisation but can still close the gap.
It sets three missions: legal and regulatory certainty proven by an FMI sandbox roll-out and a digital gilt issuance, a UK digital market built on interoperability and shared standards, and UK leadership on global standards.
The UK's edge is its common law; its weakness is that no major tokenised issuance has yet happened at home.
The short-term window is just 18 months, against fast-moving US and European tokenised markets.
The same infrastructure and standards debated for gilts and funds will underpin any future market for tokenised private company equity and secondary trading.

Sources: UK Finance, Unlocking the power of securities tokenisation, 6 July 2026 (https://www.ukfinance.org.uk/news-and-insight/blog/unlocking-power-securities-tokenisation); full report (https://www.ukfinance.org.uk/policy-and-guidance/reports-and-publications/unlocking-power-securities-tokenisation).