What does tokenisation mean for treasurers?

Tokenisation has moved from conference panels into live UK markets. Banks are using tokenised sterling deposits for payments, with asset managers launching tokenised money market funds. The government plans to issue its first digital gilt by early 2027. For corporate treasurers, the key question is how this will change the way they hold and invest cash.

What is tokenisation?

Tokenisation means recording a financial asset as a digital token on a shared, programmable ledger. This asset could be money, a bond, a fund unit, or a share. The Bank of England calls it a new way to record ownership of an existing asset.

Most financial assets are recorded on separate ledgers, where each transfer requires messages between these parties, then settlement and reconciliation. With a shared ledger, these steps happen in a single event, so the ownership record updates as the transfer settles.

Each token uses a smart contract, which is code that sets the rules for holding and transferring the token. These rules can limit ownership to approved investors or release payment when certain conditions are met. They can also settle both sides of a trade at the same time, known as atomic settlement, which removes the gap between delivery and payment.

How tokenisation differs from cryptoassets

Tokenisation and cryptoassets use the same technology, so people can confuse them. Bitcoin and similar cryptoassets have no underlying asset, so their value depends on what buyers are willing to pay. A tokenised gilt or deposit represents a claim that already exists in the regulated financial system, and its value is linked to that claim.

This difference is important for treasury policy. Most investment policies don’t allow cryptoassets, but banning everything on a blockchain could also block tokenised versions of instruments that are already allowed.

Types of tokenised money and assets

Tokenised deposits

A tokenised deposit is a commercial bank deposit recorded on a distributed ledger. It’s still a liability of the issuing bank, so the holder's credit risk is the same as with a regular deposit at that bank. The Bank of England has confirmed that UK banks can issue tokenised deposits under the current regulatory framework.

UK Finance's tokenised sterling deposit pilot involves selected banks and building societies testing live payments between institutions. Participants have already used tokenised deposits for customer payments and remortgage completions. The banks also plan to issue three digital bonds in early 2027 that will settle and pay coupons in tokenised deposits.

Stablecoins

A stablecoin is a token issued by a company outside the banking system and backed by a reserve of assets. It is designed to keep a stable value against a currency like sterling. Holders have a claim on the issuer and its reserve assets, so their credit risk is with that issuer.

The UK is building a two-tier regime. The Financial Conduct Authority published final rules for stablecoin issuers and other cryptoasset firms in June 2026, and the regime takes effect on 25 October 2027. Stablecoins that HM Treasury recognises as systemic will also come under Bank of England supervision, through a code of practice the Bank intends to finalise by the end of 2026.

Two features of the systemic regime are important for treasurers. Issuers cannot pay interest, so holding a systemic sterling stablecoin does not earn a return. Each systemic stablecoin will also have a temporary £40 billion issuance limit, replacing earlier plans to cap business holdings at £10 million per coin.

Tokenised securities and funds

Tokenised securities are bonds, shares or fund units that are issued on a distributed ledger or moved onto one from a conventional register. For treasurers, the most developed area is tokenised money market funds, where the fund's unitholder register is kept on-chain. Several of the UK's largest asset managers now offer tokenised share classes for their liquidity funds.

The FCA explained its approach in Policy Statement PS26/7. It confirms that UK authorised funds can keep their register on a distributed ledger and provides an optional direct-to-fund dealing model, where investors deal directly with the fund. The FCA also confirmed that tokenised MMFs can be used as collateral for uncleared derivatives under the UK European Market Infrastructure Regulation, as long as they meet the current eligibility rules.

Where tokenisation could change treasury operations

Settlement outside banking hours

UK payment and securities systems like CHAPS and CREST work on fixed business-day schedules. Cash that arrives after the cut-off often sits idle until the next business day, and weekend receipts wait until Monday. Distributed ledgers run continuously, so tokenised money and assets can settle at any hour.

For groups with many entities, continuous settlement could reduce the extra cash each subsidiary keeps to cover payment timing. Funding could move to the entity that needs it as soon as needed.

Collateral mobility

Collateral is one of the best use cases. Posting collateral today usually means moving cash or eligible securities through custody accounts, with settlement cycles and the risk of failed deliveries. Tokenised assets can move between approved counterparties in seconds, making it practical to pledge an existing investment without selling it.

This connects directly to the repo market, where cash is lent against high-quality collateral. Our guide to secured cash investments explains how collateral protects cash investors today, and faster collateral transfer would make that protection easier to use.

Programmable liquidity

Smart contracts can automate parts of a treasury policy. A rule could move operating cash above a set buffer into an approved tokenised instrument, as long as the counterparty stays within its limit. Right now, staff apply these rules manually across multiple systems.

This kind of automation needs strong governance. Treasury teams should have clear controls over who can create, approve, and stop an automated rule, along with a full audit trail of every action.

What tokenisation leaves unchanged

Tokenisation changes how ownership is recorded and transferred, but a tokenised deposit is still an unsecured claim on one bank. A stablecoin is still a claim on one issuer and its reserves.

The same is true for funds. A tokenised MMF has the same portfolio as its regular share class, pools investor cash in the same way and has the same maturity transformation, investing for longer than the liquidity it offers. Our guide to money market funds explains how this structure behaves under stress.

Treasurers should assess each tokenised product based on its underlying exposure. The usual questions still matter: who the counterparty is, how strong its credit is, how the asset is held, and what happens if the issuer fails.

The UK tokenisation landscape

The UK is developing its approach within existing financial regulation, using sandboxes and pilots to test changes before wider adoption. Two initiatives are especially relevant for sterling cash investors.

The Digital Securities Sandbox

The Bank of England and the FCA launched the Digital Securities Sandbox in 2024. It lets approved firms operate securities on distributed ledgers under adapted rules, using real assets and real investors. In July 2026, HSBC's Orion platform became the first firm approved to operate in the DSS as a digital securities depository.

The digital gilt

HM Treasury plans to issue a Digital Gilt Instrument (DIGIT) through the DSS by early 2027. DIGIT will be a short-term gilt issued directly on a distributed ledger, settled on-chain and listed on the London Stock Exchange's main market. In October 2026, the government appointed six banks as joint lead managers to start investor outreach.

DIGIT sits outside the Debt Management Office's gilt and Treasury bill programmes. Conventional UK Treasury bills remain the government's main short-term funding tool, and the pilot's results will inform whether it follows with further digital issuance.

New risks for treasury teams

Tokenisation brings new risks that most current treasury frameworks don't cover. The biggest is interoperability, since a tokenised deposit on one bank's platform may not move easily to another. If each bank creates a closed network, treasurers could end up with fragmented digital ledgers instead of fragmented bank accounts.

Operational risk also changes as wallets, private keys, smart contract code, and network availability become part of the control environment. Many ledgers can’t reverse a transaction once it’s settled. Some legal and accounting questions are still open, such as whether a tokenised holding counts as a cash equivalent under IAS 7 or FRS 102.

How should treasurers prepare for tokenisation?

Preparation begins by identifying where friction costs the business money today. Trapped liquidity, pre-funded accounts, failed settlements, and manual reconciliation all have measurable costs. Calculating these costs shows where tokenisation could add value and where the current model is already effective.

Review all investment policies. Many were written before tokenised instruments existed, so they may not clearly allow or exclude them. Our guide to writing an investment policy statement explains how to set eligible instruments and counterparty limits. This approach also applies to tokenised assets.

Treasurers should also speak with their banks, custodians, and treasury management system providers about connectivity and custody. Key milestones to watch in the next year are the first DIGIT issuance, the Bank of England's final stablecoin code, and the start of the FCA regime in October 2027.

TreasurySpring and tokenisation

TreasurySpring's cash investments give investors direct, separate exposure to a single high-quality issuer, with each investment matched to the maturity of its underlying instrument. Tokenisation could make this structure more flexible, so an investment could move between approved parties while the holder stays fully invested. That remains a long-term aim, and TreasurySpring expects to develop it in a measured, client-driven way. No TreasurySpring cash investment has been tokenised, and nothing has changed for clients in how they invest or hold their cash.

However, TreasurySpring has joined the Canton Network industry working group to advance digital asset best practice in corporate treasury. Using its own node, it has also taken part in live proof-of-concept repo and reverse repo trades on the network. Our article on mobilising cash investments on Canton explains the use cases, such as posting a cash investment as collateral without redeeming it early. This work is still in progress, and the current platform uses established, regulated infrastructure.

Preparing for tokenised money and markets

Tokenisation offers treasurers new ways to hold, move, and invest cash, and the UK framework for deposits, stablecoins, funds, and gilts is mostly in place. The technology can reduce settlement and collateral friction, but each asset's credit and liquidity profile does not change. Treasurers who measure their current costs and update their policies now will be better able to see where tokenisation adds value.

If you would like to discuss how tokenisation could affect your cash strategy, please contact our team. For anyone who can't tell the difference between their COP and their CCP, we've introduced our Treasury & Cash Investment Glossary.

*TreasurySpring’s blogs and commentaries are provided for general information purposes only, and do not constitute legal, investment or other advice.