UK regulator advocates for asset managers to tokenize funds

Investment managers in the United Kingdom are receiving regulatory support to leverage blockchain technology for the tokenization of funds, breaking away from conventional record-keeping systems.

In a recent report published by the Investment Association (IA), it outlined the rapid movement in the digitalization of financial services. It further argued that tokenization – issuing tokenized units or shares on distributed ledger technology (DLT) – will lead to a more efficient and transparent financial industry.

We are excited to announce the first phase of @hmtreasury Asset Management Taskforce – Technology Working Group’s work on harnessing the potential of innovative technologies is now complete. Published today, the UK Fund Tokenisation report, provides the green light for the… pic.twitter.com/thrudAZRqt

— The Investment Association (@InvAssoc) November 24, 2023

Sarah Pritchard, executive director of markets and international at the Financial Conduct Authority (FCA), emphasized that while the regulator is open to exploring innovative avenues for asset managers, it must also delineate the potential risks:

“This is an exciting milestone and paves the way for exploring more transformative use cases in the future. We want to support firms to implement technological solutions which enhance and strengthen the UK’s asset management industry, while addressing risks and potential harms.”

Meanwhile, the report proposed certain principles for implementing tokenized funds.

These principles include ensuring relevance to both domestic and international investors and avoiding anarrow focus solely on the investment asset manager industry.

“Offer opportunities to the widest possible range of firms across the sector, rather than focusing on any specific type of firm, product type, asset class, or customer group,” the report noted.

Furthermore, it articulated the need for an accompany

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Author: Ciaran Lyons

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