In a recent speech, Sasha Mills, executive director of Financial Market Infrastructure, emphasized the potential of artificial intelligence (AI) in market monitoring, and the opportunities in tokenization while discussing regulatory priorities for 2025.
Michele Curtoni, head of strategy at the SIX Digital Exchange said in emailed commentary: “The opportunities for growth enabled by embracing tokenization are truly expansive, and institutions globally are now prioritizing their DLT and blockchain programs as a result. The demand from market participants to join the movement in diversifying their portfolios with tokenized and digital assets shows no signs of slowing down.”
The BoE is facilitating safe experimentation through initiatives such as the Digital Securities Sandbox, aiming to foster innovation without compromising financial stability. Despite relative market stability, Mills cautioned against complacency.
Stress testing for central counterparties (CCPs) remains a key tool for the Bank to assess financial resilience. She also highlighted international efforts to improve margin transparency to counteract procyclical risks during market fluctuations.
Jo Burnham, margin expert at OpenGamma, said in emailed commentary: “Greater transparency around margin models and more sophisticated technology will enable firms to better anticipate and prepare for these shifts, reducing the risk of liquidity stress and ensuring smoother market functioning during periods of volatility.”
Additionally, ongoing regulatory reforms, including the repeal of the UK’s European Market Infrastructure Regulation (EMIR) in favor of a dynamic rulebook, aim to streamline regulatory processes while maintaining robust oversight.
“We need to work together to manage the risks and, importantly, make the most of the opportunities. As FMIs you will need to adapt your risk management strategies and business models to navigate this new environment effectively while making the most of the technological advances that could enable a step change in the services you provide,” Mills said in the speech.