Rathi: tokenisation is creating 'parallel market structures' that regulators must keep up with

On 22 September FCA chief executive Nikhil Rathi told an industry audience that the UK must “move from experimentation to adoption” in tokenised wholesale markets. He warned that the mix of on-chain and traditional venues raises unresolved questions about market structure and oversight.

He was speaking at TheCityUK’s annual dinner, sponsored by Nasdaq. The FCA published the text as a drafted speech that “may differ from the delivered version”. Rathi noted that HSBC Orion had become the first entrant approved to provide live Digital Securities Depository services.

What industry told the regulators

Earlier in the year the FCA and the Bank of England asked for views on tokenisation in wholesale markets. Rathi said the exercise drew more than 120 responses. Three themes stood out:

• Opportunities: in post-trade, particularly for moving collateral more efficiently.
• Obstacles: around settlement, prudential treatment and interoperability, plus insolvency and cross-border conflict-of-laws issues.
• Speed: what some firms called “pilot fatigue”. They want to move from sandboxes “towards full production and permanence”.

Views were split on two points. The first was whether accountability for DeFi protocols should sit with regulated persons or with the platform. The second was whether exposure tokens should be treated as derivatives, in line with their legal structure, or have to settle in a CSD or DSD.

Next steps

Rathi said a joint tokenisation roadmap with the Bank of England would set out “a more comprehensive route from today’s testing environments, to tomorrow’s established market infrastructure”. He also said the FCA intends to consult on safeguarding rules for relevant tokenised investment assets, because tokenisation “can’t be allowed to leave ambiguity about ownership”. The FCA had also sought views on gold tokenisation that month.

He gave the most attention to market structure. He described a landscape where traditional exchanges offer conventional and micro contracts alongside on-chain native derivatives and tokenised securities. He said this amounts to “parallel market structures that operate alongside traditional markets”. How these interact “in a continuous trading environment” is a key question, he said, with implications for liquidity, price discovery, fragmentation and resilience.

For equities, he raised specific questions:

• how disclosures would work in more continuous trading
• how companies would understand their investor base
• what continuous trading would mean for closed periods
• how market abuse would be monitored

He said the FCA is exploring agentic AI as a “first responder” in monitoring wholesale markets. That work covers more than 9,000 firms and about a billion rows of data a day.

Rathi also pointed to the governance problem with decentralised platforms. The registered entity, validators, sequencers, developers and front ends “may each be located in different jurisdictions”. That makes it harder to identify where critical functions are performed and which regulator, if any, is responsible.

Why it matters

This was a speech, not a rule, but it signals which questions the FCA will raise next. For venue operators, the point about parallel market structures suggests the regulator will look closely at how on-chain prices for tokenised UK equities relate to the primary market.

For issuers and investor-relations teams, the mention of closed periods and disclosure timing in a continuously traded market is new. It is worth tracking in the forthcoming roadmap and safeguarding consultation. Firms with tokenisation plans should treat the reference to “pilot fatigue” as encouragement to bring production-ready proposals.

Sources

• FCA, “Building the next generation of market infrastructure”, speech by Nikhil Rathi, 22 September 2026 — https://www.fca.org.uk/news/speeches/building-next-generation-market-infrastructure