To shine a light on what action the government, regulators, and industry must take to enable this digitalisation, we've collaborated with TheCityUK on their Technology and Disruption campaign to produce our joint report on “Digitalisation of capital markets in the UK”.

Sharon Lewis, Head of Financial Institutions & Co-Chair of Digital Assets & Blockchain Practice at Hogan Lovells, said, “The digitalisation of capital markets is vital to the UK’s competitiveness and growth agenda. Whilst we have seen technology transform the retail market over the last decade, the wholesale market has lagged behind. The use of distributed ledger technologies not only improves speed and efficiencies but promises to entirely transform wholesale finance – unlocking capital and developing new products.”

“It was a pleasure to collaborate with TheCityUK to shine a light on what action the government, regulators, and industry, must take to enable this digitalisation, and ensure that the UK maintains its status as a world leading financial centre.”

Key takeaways from the report

1. Existential threat: The report highlights that the UK’s status as a world-leading international financial centre is at risk if the opportunity is not taken to deliver a timely digital transformation of the UK’s capital markets, through use of distributed ledger technology (DLT)and tokenisation. Other jurisdictions are seizing this opportunity – the ECB DLT settlement trials involved 1.6bn EUR in DLT transactions last year. If the UK wants to continue to play a leading role in shaping the future of the global financial system, it needs to scale and speed up its adoption of these new technologies.
2. Key opportunities are FMIs and digital bonds: The report highlights the opportunity to bolster efficiency and long-term competitiveness of our capital markets through distributed ledger technology (DLT) and the tokenisation of securities, particularly by improving the conditions for trading digital bonds on both primary and secondary markets, and the successful digitalisation of our financial market infrastructure.
3. Concrete actions: Since last autumn we have seen good progress: the opening of the Digital Securities Sandbox, the introduction of the Property (Digital Assets etc.) Bill, the Mansion House announcement of a digital gilt and subsequent promise of comprehensive crypto regulation. However, to help ensure momentum is continued, the report sets out concrete actions for government, regulators, and industry to take forward, starting right now. 
4. Many recommendations concerning role of industry: This digital transformation of capital markets will depend as much on industry as on government. Our recommendations include: industry-led initiatives and collaboration; regulatory sandboxes; development of the digital payments leg; as well as government leadership in areas such a successful digital gilt pilot, an appropriate collateral framework and review of the tax regime for digital securities. The recommendations also emphasise the importance of developing common industry standards across processes, platforms, and jurisdictions, as well as working to ensure interoperability of DLT-based solutions and the avoidance of market fragmentation.
5. Collaboration: It is vital that government, regulators, and industry collaborate by taking urgent action to future-proof the role of UK capital markets in an increasingly digitalised global landscape. We, in Hogan Lovells, will be working closely with our clients, and helping to shape government and regulator actions.

Please click the Read more button to download the full report, and feel free to reach out to one of our team members to find out more.