by Chris Elms, Chief Executive Officer, Euroclear UK & International
Next generation of UK asset transfer
As financial markets undergo rapid digital transformation, the need for resilient, scalable and secure settlement infrastructure has never been greater.
At Euroclear UK & International, we are at the forefront of enabling this, ensuring the stability and efficiency of securities transactions across asset classes, including domestic and international bonds, equities, derivatives and investment funds.
As the UK’s Central Securities Depository (CSD), Euroclear UK & International settles trillions of pounds in securities transactions day-in day-out, providing a strong foundation for financial market stability.
As a resilient Financial Market Infrastructure (FMI), we want to ensure that the next generation of UK asset transfer is brought forward responsibly.
We recognise that trust and confidence in financial markets are essential, particularly in the context of evolving and escalating threats, including cybersecurity.
For the UK market to function, infrastructure must be secure, scalable and interoperable – without these features, fragmentation and attendant risks to market integrity and financial stability inevitably arise.
The UK’s FMI landscape is evolving, with innovations reshaping settlement, payments and clearing.
The successful integration of new financial technologies, such as tokenised assets and digital currencies, requires effective public-private partnerships and collaboration to ensure safety by design.
Euroclear has been engaging with financial institutions, regulators and industry participants to explore the practical applications of new technologies while maintaining security and efficiency for a long period.
A key initiative in this evolution is the UK’s Digital Securities Sandbox (DSS), jointly run by the Bank of England and the Financial Conduct Authority (FCA) (www.bankofengland.co.uk).
This month, Euroclear UK & International applied to enter this FMI sandbox to operate a Digital Securities Depository and serve as a trusted partner to the market with a plan to facilitate fixed income issuance within the DSS.
The DSS provides a regulated live environment where firms can test and develop their digital asset capabilities within a modified regulatory framework.
The Bank of England and FCA aim to achieve three key objectives through the DSS.
- Facilitate innovation: promote a safe, sustainable and efficient financial system by enabling new technologies.
- Protect financial stability: allow innovation to scale safely while mitigating risks.
- Protect market integrity: ensure the integrity and trustworthiness of UK financial markets.
Euroclear is committed to supporting market transformation by providing the necessary infrastructure, products and services to meet current and future settlement demands.
In the case of Distributed Ledger Technology (DLT), Euroclear participated in several experiments and proof-of-concept exercises before launching our Digital Securities Issuance (D-SI) service offering in 2023. The D-SI is a crucial module within Euroclear’s D-FMI platform and part of our strategy and vision to become a data and digital enabled FMI.
We have consequently built the D-SI’s DLT issuance rails to meet high regulatory standards and facilitate issuance under trusted English securities law. We have also devised a means to ensure liquidity according to a hybrid model underpinned by traditional secondary markets and collateral management practices.
Euroclear’s experience in enabling DLT-powered securities, including the World Bank’s Digital Native Note EUR100m sustainable bond and AIIB’s recent programme USD500 million issuance program, provides a strong foundation for supporting the UK’s DSS. In 2024, Euroclear participated in an experiment to tokenise gilts, Eurobonds and gold to circulate these ‘digital twins’ in a novel collateral management system.
Euroclear UK & International recognises the potential of DLT to transform securities transactions and this work dovetails with other areas within our partnership with authorities — including on the UK Accelerated Settlement Taskforce — to further HM Government’s ambitious overall strategy to advance digital infrastructure across financial markets.
As the UK’s CSD, we are well-positioned to help shape and operationalise this initiative, ensuring safe and scalable adoption of digital assets in regulated markets.
