The Bank of England opened a consultation October 29 on how central counterparties could accept tokenized forms of eligible collateral. It is seeking to clarify supervisory expectations as financial-market participants explore digital representations of assets used to support cleared transactions.

The bank says the existing regulatory framework does not prevent such arrangements, provided the collateral meets central-clearing standards. Assets must remain capable of reliable valuation, transfer and realization when required, including during stressed market conditions.

A proposed supervisory statement would explain how applications involving tokenized collateral are assessed. The approach recognizes that different technical arrangements might satisfy the same risk requirements in different ways. It does not establish that every tokenized asset is eligible or that every proposed arrangement is approved.

The consultation closes February 12, 2027, and invites responses from clearing houses, their participants, infrastructure providers and technology firms. Potential benefits include faster collateral movement and improved responses to margin calls. Those are possibilities being explored while the bank maintains financial-stability requirements.