Tokenised finance expansion raises stability and cyber risks for UK and global markets

Traders Union
All News
Crypto
Tokenised finance raises stability risks

Highlights

Global tokenised finance could reach $88 trillion by 2035, with UK economic output potentially increasing by £33 billion annually according to a UK government task force.
Regulators including the Bank of England and the SEC, alongside banks such as Barclays and asset managers like BlackRock, are advancing tokenised collateral, gold markets, gilts, and ETFs.
Regulators warn that instant settlement and agentic AI could amplify financial stability and cyber risks, as seen in the recent $6.3 billion Binance hack attributed to North Korean actors.

Regulators and markets prepare for wider tokenisation

As reported by the Financial Times, former GCHQ chief David Omand warns that tokenisation and frontier AI are creating overlapping risks for monetary and financial stability. He argues that digital representations of assets on shared ledgers could make markets more efficient, but also more vulnerable when combined with autonomous systems and instant settlement.

Tokenised assets still account for a small share of global finance. Economist Darrell Duffie estimates that about $15 billion of Treasuries, $15 billion of real-world assets and 5% of repurchase agreements are currently tokenised, even as banks and investors push for broader adoption.

Large financial institutions and public bodies are nonetheless planning for expansion. Citibank says tokenisation could reduce transaction costs by about 24%, while a UK government task force says the shift could add up to £33 billion in annual economic output and £14 billion in annual tax revenue for the UK by 2035. The same task force projects global tokenised finance could reach $88 trillion by that date.

In the UK, the Bank of England is consulting the industry on a regulatory framework for tokenised collateral at clearing houses, the Financial Conduct Authority is preparing for a tokenised gold market, and the Treasury is expected to issue tokenised gilts. Barclays, NatWest and Lloyds have also completed what is described as the world's first tokenised bank transfer.

In the U.S., BlackRock and other large asset managers are issuing tokenised exchange traded funds, while the Securities and Exchange Commission has set out rules around tokenised equities. Infrastructure groups including the Depository Trust & Clearing Corporation and New York Stock Exchange are also developing token-based systems for collateral management and settlement.

Faster market stress and cyber threats draw scrutiny

The core concern is that higher financial velocity may amplify instability, especially if agentic AI systems begin moving deposits, securities and collateral at machine speed. The Dallas Federal Reserve says instant settlement tied to tokenised retail bank deposits could allow customers chasing yield to switch banks almost immediately, increasing funding pressure and reducing banks' capacity to lend.

That dynamic could make stress episodes harder to contain. The International Monetary Fund says faster finance means failures can spread more quickly than institutions or supervisors can respond, raising the prospect of runs more severe than the 2023 collapse of Silicon Valley Bank.

Omand also points to cyber risk as a second major threat. He says frontier AI is giving advanced hacking capabilities to less skilled actors, with attacks potentially targeting smart-contract code, keys, bridges, data feeds, cloud providers and the AI agents operating around ledgers.

These threats could come from hackers, organised criminal groups or state-linked agencies from countries such as Russia or China, he says. The article cites the recent $6.3 billion hack of Binance, reportedly by North Koreans, as an example of the scale of the danger.

Governments and central banks are therefore under pressure to strengthen cyber defences and build safety nets for highly liquid digital markets. But cross-border coordination remains uncertain, as geopolitical tensions complicate cooperation on digital regulation, stablecoins and tokenised currencies, including differences between U.S. support for dollar-based stablecoins and Europe's preference for instruments such as a digital euro.

Earlier, we looked at AI data-center financing as rising costs, delays and power constraints tested investor confidence in US projects.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.