British investment managers have received approval to create tokenized funds, marking a shift towards using blockchain technology in mainstream asset management.

The country’s trade body gave the green light on Friday, allowing funds to be split into smaller digital tokens backed by blockchain technology.

UK Investment Managers to Launch Tokenized Funds

The Investment Association announced that funds authorized by the UK’s Financial Conduct Authority (FCA) can begin creating tokenized funds. However, the Investment Association has stipulated these funds must invest in mainstream assets with unchanged valuation and settlement processes.

Michelle Scrimgeour, CEO of Legal & General Investment Management and the chair of a pivotal working group, expressed enthusiasm for the initiative, stating, “Fund tokenization has great potential to revolutionize how our industry operates by enabling greater efficiency and liquidity, enhanced risk management and the creation of more bespoke portfolios,”

The working group includes influential members like BlackRock (BLK.N), M&G (MNG.L), and Schroders (SDR.L). Their collective effort is geared towards harnessing the benefits of blockchain, a digital ledger primarily used for cryptocurrencies, to enhance the asset management sector.

This initiative aligns with Britain’s broader strategy to revitalize its asset management sector after Brexit, leveraging innovative technologies to enhance liquidity and competitiveness.

Global Surge in Tokenized Funds

Globally, tokenized funds are gaining traction, with regions like the United States, Europe, and Asia already making headway.

A recent report by Calastone, a global funds network, indicated that Asia and the United States are leading this movement. Approximately 39% of firms in the U.S. and 38% in Asia are acti