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.

Understanding the Impact of Tokenised Banking on Startup Founders in the UK

Shawn Jhanji
Mar 31
3 min read

The UK’s biggest banks are quietly transforming the financial system that startup founders rely on. Lloyds, Barclays, HSBC, NatWest, Nationwide, Santander, and Monzo are all involved in building tokenised banking infrastructure. This is not a crypto experiment or a speculative venture. It is the existing financial system being upgraded from within, using digital tokens to represent traditional assets like sterling deposits.

Many founders associate tokenisation with fundraising — issuing tokens that represent shares in their companies. While that is one important aspect, there is a broader and faster-moving story: the banking system itself is becoming tokenised. Understanding this shift is crucial for startup founders who want to stay ahead and make informed decisions about their banking and finance.

Eye-level view of a digital screen showing a tokenised banking transaction interface — Tokenised banking interface on a digital screen

What Tokenised Banking Means for Founders

Tokenised banking involves creating digital tokens that represent traditional financial assets held by banks. These tokens are not cryptocurrencies or stablecoins. They are digital versions of the same money founders already use, but with added benefits such as faster settlement, greater transparency, and improved programmability.

For example, a tokenised deposit is a digital token that represents a sterling deposit held at a bank. It can be transferred instantly and securely on a blockchain-like network, reducing the delays and costs associated with traditional banking transactions.

In January 2026, Lloyds completed the UK’s first public blockchain transaction using tokenised sterling deposits. They purchased a tokenised gilt (a UK government bond) from the digital asset exchange Archax via the Canton Network. This transaction demonstrated how tokenised deposits can be used in real-world financial markets, not just as a theoretical concept.

Why UK Banks Are Building Tokenised Infrastructure

The involvement of major banks shows that tokenisation is not a fringe idea. UK Finance, the trade body representing over 300 financial institutions, launched a live pilot project involving six banks to test tokenised deposits across three real-world use cases. Monzo later joined as the seventh participant.

These banks are motivated by the potential to:

Speed up transactions: Tokenised deposits can settle instantly, unlike traditional payments that may take days.
Reduce costs: Fewer intermediaries and simpler processes lower transaction fees.
Increase transparency: Tokenised assets can provide clear, auditable records.
Enable new financial products: Programmable tokens allow for automated compliance and innovative services.

For startup founders, this means the banking services they depend on will become faster, cheaper, and more flexible.

How Tokenised Deposits Differ from Crypto

It is important to clarify what tokenised deposits are not:

Cryptocurrencies like Bitcoin or Ethereum.
Stablecoins issued by private companies.
Speculative assets subject to wild price swings.

Instead, tokenised deposits are digital representations of money held at regulated banks. They carry the same legal protections and stability as traditional bank deposits. The difference lies in how they are recorded and transferred — using secure, blockchain-inspired technology rather than legacy payment rails.

This distinction matters because many founders hesitate to engage with anything labelled “token” due to the volatility and regulatory uncertainty surrounding crypto. Tokenised banking infrastructure offers the benefits of digital assets without those risks.

Practical Benefits for Startup Founders

Startup founders can expect several practical improvements as tokenised banking becomes mainstream:

Faster payments and settlements: Payroll, supplier payments, and investor distributions can happen in near real-time.
Simplified fundraising: Tokenised shares and deposits can be managed on the same platform, reducing administrative overhead.
Improved cash management: Programmable tokens enable automated workflows, such as releasing funds only when certain conditions are met.
Greater transparency and auditability: Every transaction is recorded immutably, simplifying compliance and reporting.

For example, a founder raising capital through tokenised shares can receive funds instantly as tokenised deposits, which can then be used immediately for business expenses or investments.

What Founders Should Do Now

The tokenisation of banking is still in its early stages but moving quickly. Founders should:

Stay informed about developments from their banks and UK Finance.
Ask their banking partners about tokenised deposit services and pilot programs.
Consider how tokenised banking could improve their operations, such as faster payments or automated compliance.
Seek professional advice before making decisions involving tokenised assets or fundraising.

Understanding this shift will help founders avoid surprises and take advantage of new opportunities as tokenised banking becomes part of everyday business.

Disclaimer:

This article is provided for general information only and does not constitute legal, financial, or investment advice. The regulatory treatment of tokenised assets and digital securities varies by jurisdiction and continues to evolve. Readers should seek independent professional advice before making any financial, legal, or regulatory decisions.