We are delighted to report that ClearToken CSD Limited has been approved by the Bank of England to pass Gate 2 in the Digital Securities Sandbox, granting us authorisation to operate as a Digital Securities Depository (DSD). In doing so, ClearToken CSD becomes the first FMI to be a DSD, taking a major step towards becoming the world’s first tokenised international central securities depository (iCSD): regulated, and open to the market today.

ClearToken was the first company to progress through Gate 1 of the sandbox, and is the first independent, market-facing infrastructure to pass Gate 2. This is testament to the fantastic team of experts we have built here at ClearToken, and their hard work and commitment to our vision and strategy. This is undoubtedly a key milestone for us, but it is far more than that.

The Real Bottlenecks in Institutional Adoption

Tokenisation has so far failed to transform wholesale capital markets, chiefly because while institutions can currently issue tokens at scale, issuance was never the primary bottleneck. Three structural components have been missing from the market:

• A uniform legal object that remains identical across trading venues;
• Statutory settlement finality; and
• A shared settlement asset.

These are challenges of law and market plumbing, not software engineering.

ClearToken is the first market infrastructure to address all three directly, and the first to do so inside a regulated, statutory perimeter rather than through exemptions or forbearance. They are also not solved by headlines. Whilst a press release, a pilot or a no-action letter can generate news, they cannot give a treasurer certainty that collateral pledged overnight will still be theirs if the counterparty fails before the market opens. Issuing a token takes minutes, but ensuring its transfer survives participant insolvency requires statutory legal engineering.

We have resolved these real market blockers through achieving a set of important firsts:

• solved statutory settlement finality for tokenised securities;
• ensured the ISIN we issue is the same as the underlying security;
• holding the permissions to settle both tokenised cash and tokenised securities; and
• established all of this on a purely statutory footing under English law, fully within the regulatory perimeter.

It marks a vital step forward for financial markets and demonstrates something the world should notice and understand: the City of London, the world’s booking hub, where the bulk of global derivatives, repo and collateral is documented under English law, is not just talking about tokenisation. It is delivering it, in regulation, in legislation and in operational companies.

Atomic Settlement Alone Does Not Solve for Market Structure and Resilience

Tokenisation projects have also shown that tokenising assets does not inherently deepen liquidity. Disconnected tokenised issuances actually split existing netting sets across disparate venues, which only serves to fragment liquidity pools. Analysis from CLS Bank International shows that moving settlement flows to instant atomic settlement could increase liquidity requirements a hundredfold for major global banks. Liquidity follows statutory finality and collateral mobility rather than token volume.

Automated and continuous markets also introduce operational risks that code cannot manage alone. The IMF warned in July 2026 that failures in automated systems could propagate faster than supervisors can respond. Legal scholar Hilary Allen, professor of law at American University Washington College of Law, noted that code removes the grace and discretion vital to containing market contagion. Code can assure a technical process, but it cannot bind a court. Restoring discretion requires regulated infrastructure with an enforceable rulebook, default arrangements, escalation paths, and a named accountable person so that losses have a defined address.

Solving for Legal Identity and Statutory Finality

Introducing Tokenised Depository Interests (TDIs)

To solve for a uniform legal object that enables assets to maintain a cross-platform identity, ClearToken has created Tokenised Depository Interests (TDIs) under English law.

Synthetic tracker certificates or Special Purpose Vehicle (SPV) debt structures offer no direct equity ownership or voting rights. By contrast, a TDI uses a process similar to the existing, tried-and-tested CREST Depository Interest model, where a custodian holds the underlying asset on trust for a nominee, which declares itself trustee for the holder by deed poll. Through this approach, the holder gains a direct beneficial interest in the underlying security. As per the modified Regulation 24 of the Uncertificated Securities Regulations 2001, an entry on the Operator register provides prima facie evidence of title to the TDI itself.

The result is, to our knowledge, a first for the market: the ISIN of the TDI we issue is the same as the underlying security. The token is not a wrapper, a tracker or a synthetic copy but the same legal object, recognised identically on every venue on which it trades and fully fungible with the same security wherever else it is held in existing traditional market infrastructures.

The Legal Concept Behind Settlement Finality

We believe ClearToken is the first to have solved settlement finality for tokenised securities on a statutory basis. The legal concept of settlement finality is established under the Settlement Finality Regulations 1999 (SFRs), not by the properties of a ledger.

Alongside the SFRs, settlement finality is ensured through Article 3(2) of the UK CSDR which requires transferable securities used in financial collateral arrangements to be recorded in book-entry form in a CSD. This is a statutory obligation that tokenised securities held solely on public blockchains may fail to meet without the appropriate legal and regulatory recognitions.

Furthermore, regulation 2 of the SFRs defines a transfer order as an instruction discharging a payment obligation or transfer of a security, attaching finality to system rules rather than the underlying technology. This aligns with Project Agorá, a joint BIS and Institute of International Finance (IIF) initiative, which reported on 27 May 2026 that cross-border finality can be achieved through national law rather than ledger coordination.

Collateral and Intraday Funding: Our First ‘Killer’ Use Case

Collateral – its movement and its reuse – is the primary constraint in wholesale funding, and the industry has identified it as tokenisation’s first truly viable business case to solve existing real-world problems. To fulfil this promise, collateral desks do not need novelty; they need certainty that margin received can be reused, that a pledged asset is the same fungible legal object at every venue, and that title transfer and settlement finality hold under the law that most master agreements are already written in.

English law provides that certainty today, and ClearToken makes it available 24/7. Legacy repo is an overnight instrument because the plumbing beneath it settles in batches during business hours, not because trading desks want it that way. In a continuous 24/7 system, those desks can instead execute intraday repo, for example, financing an asset at 03:00 on a Sunday to meet a margin call.

ClearToken’s Live Capabilities Under Gate 2

Passing Gate 2 permits ClearToken CSD to deliver live notary, maintenance, and settlement services within a Financial Market Infrastructure (FMI) perimeter. To maintain a controlled environment within the sandbox, initial settlement services will support a subset of securities usable as collateral for securities financing transactions (SFTs), including gilts, corporate bonds, and FTSE 350 public equities.

These assets will settle 24/7, meaning money and securities can move against each other at any hour, on any day, with statutory finality, and book directly into existing collateral and treasury systems without altering underlying ledgers.

Our phased roadmap will progressively expand eligibility, subject to the Bank of England’s approval, to include global government bonds, private funds, and physical commodities such as gold. This matters because, as the IMF has observed, tokenisation can make settlement programmable but it cannot programme liquidity into existence: the assets that are hardest to mobilise today, from gold to money market funds and cryptoassets, only become useful collateral when they arrive with an ISIN and book into existing collateral systems unchanged.

Keeping Cash as the Settlement Asset

Effective settlement requires securities and cash legs. While tokenised bond programmes await on-chain central bank money, ClearToken’s cash leg is operational today. ClearToken Depository Limited, an FCA-authorised Payment Institution and registered cryptoasset firm, operates CT Settle. CT Settle provides delivery-versus-payment (DvP) and payment-versus-payment (PvP) settlement in commercial bank money, stablecoins, and cryptoassets, and is ready for tokenised deposits under existing permissions.

Together, this makes ClearToken the first group to hold the permissions to settle both tokenised cash, through an FCA-authorised entity, and tokenised securities, through a Bank of England-approved DSD, under one roof. Both legs of the trade are live and regulated today.

Our Neutral, Horizontal Financial Market Infrastructure Model

To complete our neutral, horizontal post-trade FMI model, our subsidiary ClearToken CCP is currently progressing through the regulatory process with the Bank of England for authorisation as a Central Counterparty (CCP) and recognition as a Recognised Clearing House (RCH). Novating repo, securities lending, and other financing trades to ClearToken CCP will bring un-netted bilateral flows into a safe, cleared 24/7 funding market.

At ClearToken, we recognised that scaling institutional participation in digital assets also depended on financial market infrastructure that serves to connect rather than silo. Taking a neutral and horizontal approach contrasts with proprietary enclosed systems, including HSBC’s internal depository, approved in July. None of the existing systems offer a neutral venue to settle securities horizontally against commercial bank money, tokenised deposits, or stablecoins under a unified legal framework.

Crucially, none of what ClearToken has built rests on no-action letters, regulatory forbearance or bespoke carve-outs. Every element, from title and finality to the cash leg, is statutory, regulated and permitted under English law.

The UK Is Delivering

Much of the global conversation about tokenisation is dominated by announcements from the United States, and much of that activity rests on no-action letters, exemptive relief and pilots that can be withdrawn as quickly as they were granted.

The UK has taken a different path. Parliament legislated for the Digital Securities Sandbox in 2023; the Bank of England and the FCA built a gated, supervised route to live operation; and English law, already the governing law of the world’s derivatives, repo and collateral documentation, provided the legal object, the finality and the title. Gate 2 is proof that this path works, and it gives a bank’s general counsel, chief risk officer and treasurer the same answer: this is real, this is certain, and you can use it today.

What’s Next

ClearToken CSD passed Gate 1 on 12 December 2024, Gate 2 in September 2026, and targets full UK CSDR authorisation in H2 2027. Tokenisation, as we envisage it, will enable a new era of programmable, 24/7 finance, extending the asset base beyond public shares and bonds and enabling, through the attendant cost savings of the technology, financial inclusion and empowerment at a level the current systems cannot deliver.

As a majority market-owned FMI, we are now inviting market participants, investment banks, and trading venues, in the UK and globally, to join our working groups to help construct the rules for continuous, 24/7 post-trade settlement. The infrastructure is live. The legal certainty is in place. The question for the market is no longer whether tokenisation works at institutional scale, but who moves first and for which use cases – whether it is 24/7 trade settlement or margin collateral, instant collateral substitution or round the clock creation and redemption of funds and stablecoins, ClearToken is ready.

Get in touch with the team via: info@cleartoken.io.

Finally, our thanks go to the ClearToken team for delivering something the market has talked about for a decade, and nobody had yet delivered as an open, neutral system: a live, regulated, tokenised Financial Market Infrastructure, built to unlock the potential of digital assets for the global economy.