Post-trade infrastructure provider ClearToken CSD has secured regulatory approval from the Bank of England to operate a Digital Securities Depository (DSD) within the UK’s Digital Securities Sandbox (DSS). The regulatory milestone, known as “Gate 2,” grants ClearToken the authority to issue and settle tokenised versions of existing financial securities under central bank supervision, subject to specific operational limits.
The decision marks a significant shift in the modernisation of financial market infrastructure (FMI), introducing regulated, continuous 24/7 settlement for tokenised debt and equities.
ClearToken’s entry into the DSD space establishes several milestones for both UK and international financial markets. The company has secured a unique position by achieving five distinct regulatory and operational distinctions:
- First DSD approved to settle tokenised equities and corporate bonds alongside sovereign debt.
- First non-bank entity to pass Gate 2, making it only the second firm overall to reach this regulatory stage.
- First cloud-native securities settlement system in the UK.
- First FMI to bridge traditional financial markets with 24/7 tokenised securities markets.
- First FMI to support intraday repurchase agreements (repos) on a continuous 24/7 basis.
The DSS is a joint initiative operated by the Bank of England and the Financial Conduct Authority (FCA) regulator. It functions as a regulated, live “safe space” designed to test how developing technologies, such as distributed ledger technology (DLT) and blockchains, can be used to issue, trade, and settle financial securities.
Says Ben Santos-Stephens, CEO of ClearToken Group: “Our approval to operate a live DSD is hugely significant for the market. The biggest hurdle for institutional adoption of digital securities has not necessarily been the technology; it has been whether the infrastructure around that technology is sufficiently regulated, robust and legally recognised. Banks, asset managers and other market participants can now have confidence that digital securities can operate within a trusted, regulated post-trade framework alongside traditional financial assets.”ClearToken operates as a neutral, horizontal post-trade infrastructure group designed to unify the fragmented digital asset ecosystem. The company’s model integrates three core pillars of post-trade services – securities settlement, cash movement, and trade clearing – across three dedicated regulated entities. With the recent sandbox approval, all three units have reached major regulatory benchmarks. ClearToken Depository is already authorised by the FCA as an Authorised Payment Institution and registered crypto-asset firm to handle fiat, stablecoins, and digital assets. Meanwhile, ClearToken CCP has submitted its application to the Bank of England to operate as a central counterparty.
By aligning these components, ClearToken enables institutions to issue, settle, finance, and pay for assets within a single, regulated environment. To prevent market fragmentation, ClearToken utilises identical International Securities Identification Numbers (ISINs) for both traditional and digital iterations, preserving user rights and maintaining liquidity pool fungibility.
Commenting on ClearToken’s technology stack, Santos-Stephens notes: “Tokenisation and the DLT and blockchain processes which underpin it, have the potential to provide access to securities and assets to a much broader customer base than is possible in traditional CSD custody chains. ClearToken is technology neutral from a DLT integration perspective, and like several other financial infrastructure providers, is following a multi-chain strategy to ensure that we can maximise the potential use of the assets we are able to tokenise.”
For its core cloud-hosted functionality, ClearToken chose Nasdaq’s Eqlipse Clearing application to support the development of its clearing and settlement service for digital assets. The technology serves as a real-time, multi-asset clearing and risk platform for both traditional and digital markets.
For the wider financial industry, this development targets the primary obstacle to institutional digital asset adoption: the lack of robust, legally-recognised oversight. By transitioning tokenisation from a theoretical framework into a live, supervised market infrastructure, the initiative provides institutions with the legal certainty, rulebooks, and default arrangements required for large-scale participation.
The practical application of 24/7 settlement fundamentally alters collateral mobilisation and liquidity management. Traditional financial systems rely heavily on batch processing and rigid end-of-day cut-offs. ClearToken’s infrastructure removes these constraints, allowing institutions to execute intraday repos and borrow against tokenised collateral for hours rather than days, significantly lowering the overall cost of financing.
For ClearToken, the approval validates its horizontal clearing and settlement strategy and positions the company as a critical bridge between digital innovation and legacy finance.
When it launches, ClearToken CSD’s live settlement services will support FTSE 350 equities, UK government debt, and both sterling and non-sterling corporate bonds. These assets can immediately be utilised as collateral for securities financing transactions.
Looking ahead, and subject to subsequent regulatory non-objection from the Bank of England, ClearToken plans to scale its eligibility criteria in phases. Future expansions are slated to encompass global public equities, private funds, digital assets, and physical commodities, such as gold. This phased approach aims to allow institutions to hold diverse asset classes in a single legal form that integrates directly with their existing treasury and collateral management systems.
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