Regulators have given tokenisation in capital markets a clear regulatory pathway. However, most firms lack the data foundation to execute.
Tokenisation is the process of representing ownership of a security, such as a bond, equity or fund unit, as digital record on a shared ledger, replacing today’s paper-based settlement systems. That doesn’t necessarily require blockchain, and in fact some platforms in the Digital Securities Sandbox already run on centralised infrastructure.
It’s also distinct from cryptocurrencies and stablecoins, which also run on shared ledgers but aren’t securities. For the purposes of this article, we’re looking at how traditional asset classes move onto new settlement rails.
In May 2026, the FCA and Bank of England published a joint Call for Input, setting out their shared vision for tokenised bonds, equities and fund units in UK wholesale markets. Sixteen firms are already live in the Digital Securities Sandbox, and the FCA’s April 2026 policy statement on fund tokenisation brought authorised tokenised funds firmly inside the regulatory perimeter.
But there’s a problem. Away from the high-profile leaders, firms across the sector are scaling toward tokenised settlement before they’ve solved a much older problem lurking in the data infrastructure they already have – manual processes that lead to operational bottlenecks, creating compliance risks and limiting growth.
Tokenisation will only make these problems worse.
Ambition is moving ahead of foundations
For capital markets firms, average daily transaction volumes now stand at nearly 460,000 per firm, with a 28% increase expected over the next two years. According to AutoRek’s 2026 Investment Capital Markets Research Report, 85% of firms say their current processes would struggle to handle that growth. Digital assets are already part of that picture. 59% of firms work with digital assets in some form, a figure that rises among larger organisations.
Yet the same research shows 82% of firms acknowledge that operational work across capital markets remains largely manual, and nearly 16% of operational budgets go toward fixing errors those manual processes cause.
Firms are being handed a regulatory pathway to tokenised settlement, while still running a largely manual, error-prone operation underneath it.
Tokenisation will multiply data problems
The regulators’ Call for Input flags the complexity of tokenisation: liquidity can fragment not just between tokenised and traditional securities, but between different tokenised versions of the same security, and between UK and international infrastructure.
Even a single bond can now exist in multiple digital forms across different platforms – and those versions don’t automatically reconcile with each other, even when they represent the same underlying entitlement.
Settlement finality adds another layer. Traditional securities settle under one statutory regime. Tokenised ones, for now, can have their finality set by the operator – a legal arrangement rather than a regulatory guarantee. Firms running both are reconciling against two different definitions.
Payments offers an early preview of how this complexity impacts firms. On the payments side, when a stablecoin moves from issuance to redemption, it involves a state change recorded across multiple ledgers at once: the DLT transaction itself, the issuer’s internal records, and the corresponding cash movement in the reserve account. These steps don’t always settle at the same time, and reconciliation has to be automated to keep pace with the volumes involved. Capital markets are about to face their own version of this same challenge, at greater scale.
The high-profile collapse of FTX in November 2022 provides the clearest example of what can happen when that reconciliation doesn’t take place. A review into the crypto-exchange’s collapse found that FTX had never reconciled customer assets against the blockchain. Customer funds were commingled with sister firm Alameda Research, and the gap went undetected until the exchange was already insolvent, wiping out billions in customer holdings.
This becomes a compliance problem, not just an operational one
None of this will stay a back-office problem for long. As soon as firms can’t reconcile positions with confidence, it becomes a compliance gap too.
Across capital markets, 79% of firms say regulation already adds significant operational and financial burden, and 82% say regulatory change requires frequent updates to their data and reconciliation processes. As tokenised settlement moves from sandbox to production, that burden will land squarely on firms that haven’t yet modernised the reconciliation processes underpinning their traditional business, let alone tokenised assets.
Fix the foundation before you build on it
None of this means firms should slow down their tokenisation plans; the regulatory door is open and the early movers are making tangible headway. Instead, firms need to reverse the order in which they’re approaching the problem. A firm that can’t reconcile its current instruments with confidence has no realistic prospect of reconciling tokenised ones, where the volume is higher, the infrastructure is more fragmented, and the definitions of settlement finality no longer match.
Tokenisation will bring considerable benefits to those with the data infrastructure and processes to succeed. Those that remain reliant on cumbersome manual processes will find that the race to tokenisation was never really about the technology. It was about whether they’d fixed their foundations first.
This article was written by Murray Campbell, Head of Product & Solutions Consultants at AutoRek