July 2025
By Nick Clark, Head of the Regulatory Innovation Hub, Cambridge Centre for Alternative Finance; and
Hugo Coelho, Head of Digital Policy and Regulation, Cambridge Centre for Alternative Finance
This note summarises the content of discussions at the roundtable “From Sandboxes to Regulatory Reform: Charting a Path for Tokenized Asset Regulation”, held as part of the GFTN Insights series at the GFTN Forum, Japan on 4 March 2025.
The roundtable was hosted by the Cambridge Centre for Alternative Finance (CCAF) and Financial Innovation for Impact (FII). The Annex includes a list of participants. Consistent with Chatham House rules, this summary note does not attribute any statements or ideas to individual participants or institutions.
The objective of the roundtable was to identify the challenges for regulation of tokenized assets and foster a shared understanding of appropriate regulatory frameworks to enable asset tokenization to scale. The discussion was divided in three parts:
- Introduction and presentation of insights from CCAF research on regulatory initiatives to enable tokenization;
- Industry presentations on tokenization, use cases and experiments;
- Regulators’ discussion, focused on the challenges and opportunities that tokenization poses to Advanced Economies (AEs) versus Emerging Markets and Developing Economies (EMDEs), and the lessons learned from early regulatory reforms and experiments, including sandboxes.
Research on regulatory initiatives to enable tokenization
The roundtable started with a presentation on the findings of research by CCAF on the tokenization of assets. These were summarised in the discussion note circulated ahead of the roundtable.
Tokenization of assets is an innovation enabled by technology driving structural shifts in the financial market. Its risks and benefits are multifaceted and remain difficult to quantify and balance. The presenter set out the range of issues and legal, regulatory and policy considerations that financial authorities are confronted with —from rights attached to tokens, to the evolving role of intermediaries and the risk of decreasing use of central bank money for settlement of on-chain transactions. “Against this backdrop”, he added, “leading jurisdictions have adopted several initiatives on tokenization.” In forthcoming CCAF research, these initiatives are divided into four major groups: legislative reforms, central bank-led pilots with a wholesale CBDC (wCBDC) focus, sandbox and other initiatives, and collaborative (public-private) experiments.
He also presented the key findings of CCAF’s report Wholesale Central Bank Digital Currencies: Approaches, Implementation Strategies and Use Cases. The report discusses the need for wCBDCs and varied approaches, including as a risk-free settlement asset to support digital transactions infrastructure. The authors concluded that, despite the new-found impetus for wCBDCs experimentation, there remains a gap between the pace and ambition of central banks and the expectations of market participants.
Industry presentations on tokenization use cases and experiments
Innovation is constrained and enabled by regulation, but it is driven by the market and the application and adoption of new technologies by market participants and consumers. In the second part of the roundtable, industry representatives presented three use cases for tokenized assets in different jurisdictions.
These use cases included (i) a global real-time payment solution using tokenized money instruments, (ii) the tokenization of USD yields and the use of stablecoins in remittances, and (iii) a real estate asset tokenization project. These use cases were trialled in Project Guardian, LIFT and E-HKD Pilot Programme. Presenters emphasised the relevance of interoperability to enable tokenization to scale, the importance of collaboration between regulators and market participants and the need for appropriate licensing and supervision frameworks to enable a broader range of financial services, among others.
Regulators’ discussion
The discussion among regulators was divided into three parts.
In the first, discussants exchanged views on the different challenges faced by advanced and emerging market and developing economies (AEs and EMDEs) with respect to tokenization. Several participants described their efforts, through sandboxes and other initiatives, to identify and support use cases with a positive impact in their respective economies, while noting these will likely be different and evolve over time. One of the participants explained that fractionalisation of real estate and other real-world assets can contribute to financial inclusion and expand investment opportunities in EMDEs. The potential of tokenization in Islamic finance was also mentioned. Other use cases highlighted include the potential for stablecoins to facilitate cross-border transactions, and the efficiencies in trading of security tokens, including bonds, with the latter being one of the critical advantages for AEs.
Second, discussants focused on the regulatory and policy considerations to enable tokenization. Some discussants underlined the importance of experimentation and the use of pilots to inform the process for regulatory reforms, adding that this is an area which lends itself to public and private collaboration. When asked about the major barriers to tokenisztion, two discussants identified infrastructure and interoperability as critical issues. Others highlighted the need for regulators to improve their understanding and devise an appropriate approach for smart contracts and the operational and technology risks in tokenized markets. One participant discussed the risks and opportunities of disintermediation, particularly in post-trade processes. Another discussant argued that the provision of central bank money or bank deposits in tokenized form can address some of the policy concerns and accelerate the adoption of DLT.
The third part of the discussion focused on the lessons learned from past and ongoing experiments and pilots. Several discussants devoted their interventions to the challenges of managing sandboxes and providing a ‘graduation’ route for participating firms. A few highlighted the need to focus on ensuring interoperability for the market to scale, pointing to recent central bank initiatives in this space.
The moderator concluded that the case and conditions for tokenization vary significantly between asset classes as well as jurisdictions, and therefore the adoption of distributed ledger technology will likely be uneven and irregular. The stance and approach of financial authorities, including central banks, will be critical in driving the pace of adoption and the transition to tokenized financial markets.
With the view to advance the discussion, CCAF/FII will host two roundtables at the Point Zero Forum, in Zurich, and the Singapore FinTech Festival, this year. The roundtables will focus more narrowly on the use cases and approaches to regulating tokenization in the emerging markets and developing economies.