The London Stock Exchange joins hands with Kraken parent company to tokenize the FTSE 100 Index

The London Stock Exchange joins hands with Kraken's parent company to promote tokenization of the FTSE 100 Index.

The London Stock Exchange (LSE) announced on Monday that it will work with Payward, the parent company of cryptocurrency exchange Kraken, to jointly build a UK tokenized stock structure and use Payward's xStocks framework to issue FTSE 100 Index components on the chain. LSE24, the trading venue for these tokens, is expected to begin testing at the end of 2026, and the listing and trading target is set for 2027. Specific implementation still requires regulatory approval. The two sides will also discuss wallet-based access mechanisms, blockchain infrastructure, and how London Stock Exchange Group's (LSEG) digital securities depositories handle settlement and asset services. For an exchange group that has seen many listed companies move to New York over the past decade, the announcement means it has decided to compete on distribution channels rather than just focusing on the IPO channel.

The cumulative trading volume of xStocks

exceeds US$40 billion, of which approximately US$20 billion has been settled on the chain.

The number of active holders

exceeds 200,000. Available in more than 110 countries

LSE24 schedule

2026 → 2027, tested first, then listed after approval

Tokens retain dividends but strip voting rights

xStock is pegged one-to-one to underlying stocks or ETFs and is held through regulated custody arrangements. As a result, holders receive benefits from price fluctuations and dividends, but do not receive the voting rights that normally accompany stock certificates. It is this lack of interest that has become the main focus of regulatory objections to tokenized stocks, which explains why the London Stock Exchange positions its own work to uphold shareholder rights and governance standards rather than simply copying non-regulatory frameworks that have been traded elsewhere.

The framework itself goes well beyond the pilot phase. Since its launch a year ago, xStocks has processed more than US$40 billion in cumulative transaction volume, of which approximately US$20 billion is settled directly on the chain, with more than 200,000 active holders in more than 110 countries around the world. Kraken built the issuance mechanism by acquiring Backed Finance, the tokenized infrastructure company that was the developer of the original product, which also allowed Kraken to have results in this cooperation that the London Stock Exchange could not build on its own in the short term.

Lagos and Manila: Customers in London that cannot be reached through member companies

For retail investors in Nigeria, the Philippines or Brazil, there is almost no practical way to open a UK brokerage account. Neither brokers nor exchanges have previously found it economically feasible to build service channels for these small accounts. Moving the access layer to a self-managed wallet completely eliminates this series of registration processes. This is why the London Stock Exchange is willing to partner its brand with a cryptocurrency exchange operating in a jurisdiction where it does not own a membership.

Parallel to the distribution logic is the advantage of settlement. Traditional stock liquidations occur within fixed time windows and liquidity is spread among exchanges, custodians and depositaries, each holding idle collateral when the transaction is completed. On-chain settlement shortens the trading cycle, reduces intermediary fees, and maintains the activity of the order book after the London market closes. Whether the resulting liquidity is enough to price FTSE 100 index components at 3 a.m. will be a question that needs to be answered when it launches in 2027. Currently, participants have said they cannot give a definite answer.

Meanwhile, retail investors in the UK are currently completely unable to buy xStocks. These instruments are currently outside the scope of the UK's Financial Conduct Authority (FCA)'s current regulation, leaving the London Stock Exchange to promote an equity product that is inaccessible to its own investors.

Wall Street tokenization vault, London tokenization wallet

When the U.S. Securities and Exchange Commission (SEC) approved the tokenization of assets by the American Securities Depositary and Clearing Corporation (DTCC) at the end of 2025, the generated tokens remained within the DTCC's own infrastructure and were visible only to members and inaccessible to others. This makes the move more like an internal efficiency boost than a change in who can hold assets. The architecture described by the London Stock Exchange's partnership with Payward is just the opposite, delivering tokens to user-controlled wallets and supporting point-to-point transfers. This statement goes further and foreshadows a commitment to developing fully interchangeable native on-chain stock structures in the future. Literally understood, this means that the blockchain itself will serve as a register of shareholders in the legal sense, and the depository layer will be removed rather than digitized. Currently, no regulatory body in major markets around the world has approved such practices, which is why the statement appears in the statement only as exploratory language rather than a more definite commitment.

Payward took a year to prepare the necessary puzzles for this transaction

Kraken has recently opened up trading in U.S. listed stocks to European Economic Area customers, placing them in the same account as cryptocurrencies and xStocks-the unified multi-asset portfolio Kraken has been promoting to retail users since acquiring Backed Finance. In terms of institutional business, the company is in in-depth negotiations with Hyperliquid to introduce its decentralized perpetual futures into the U.S. market through Payward's clearing house Bitnomial, regulated by the Commodity Futures Trading Commission (CFTC), thereby gaining access to the regulated derivatives trading channel that most cryptocurrency trading platforms lack.

Competition Exchange Group also reached the same conclusion from different directions. Deutsche Börse Group bought about 1.5% of Kraken for $200 million, Intercontinental Exchange (ICE) invested in OKX, and Nasdaq bought LeveL Markets to build its own all-weather trading channel. They have all begun to invest in the possibility of tokenizing stocks before waiting for it to be feasible.

The UK's Financial Conduct Authority (FCA) determines whether it can be achieved in 2027

The World Federation of Exchanges (WFE) and several national regulators have issued warnings that tokenized stocks will divert liquidity, obscure the assets actually owned by retail buyers, and weaken the shareholder protection mechanism that underpins public listing rules. These objections cannot be resolved through a well-designed settlement layer.

The more immediate obstacle comes from within the UK. The FCA currently treats offshore xStocks as a non-regulatory tool. Therefore, the 2027 timetable is based on two assumptions: either the FCA changes its stance, or the London Stock Exchange builds an independent UK-based structure that regulators are willing to mandate from the start. These are two very different projects, with very different approval paths, and Monday's statement did not specify which one is being tried.

What the testing phase reveals first

Before any token transactions, the LSE24 test planned for late 2026 will reveal whether a traditional exchange group can achieve uninterrupted matchmaking, monitoring and reporting processes throughout the weekend, assuming a regulatory obligation of closing bells. The problem for market makers is even more serious because making quotes on British blue chips at 4 a.m. without reference trading markets open means they must abandon the arbitrage pricing anchors they normally rely on. The spreads they provide during these periods will more accurately reflect the feasibility of the model than the trading volume data on the first day of launch. The FCA is conducting separate consultations on a digital securities framework that will define the scope of regulation in the UK long before the two companies need final answers. The final result will determine whether tokenized FTSE 100 products will be used only as exports to overseas investors or will one day be able to enter the accounts of retail investors in London.