The UK regulator recommends asset managers to tokenize funds

UK investment managers are receiving regulatory support to leverage Blockchain technology to tokenize funds, moving away from traditional record-keeping systems.

In a recent report published By the Investment Association (IA), rapid progress in the digitalization of financial services has been described. Furthermore, he said tokenization, the issuance of token units or shares on distributed ledger technology (DLT), will lead to a more efficient and transparent financial industry.

We are pleased to announce the first phase of @hmtreasury Asset Management Task Force – The Technology Task Force’s work on harnessing the potential of innovative technologies is now complete. The UK Fund Coding Report, published today, provides the green light for… pic.twitter.com/thrudAZRqt

— Investment Association (@InvAssoc) November 24, 2023

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

“This is an exciting achievement and paves the way to explore more transformative use cases in the future. “We want to support businesses to implement technology solutions that improve and enhance the UK asset management industry, while addressing potential risks and harms.”

At the same time, the report suggested some principles for Implementation of token funds.

These principles include ensuring suitability for both local and international investors and avoiding a narrow focus solely on the investment asset management industry.

“Offering opportunities to as many companies as possible across the sector, rather than focusing on a particular type of company, product type, asset class or client group,” the report noted.

In addition, he highlighted the need for an accompanying roadmap for implementation and a focus on competitiveness and efficiency within the sector.

The fund must be set up in the UK and authorized by the Financial Conduct Authority (FCA), in addition to meeting traditional financial industry standards. Moreover, he stated that the legal and regulatory rules will remain the same.

in launch Separately, the UK government reiterated its support for the proposed model, stating its commitment to promoting innovative approaches within the country:

“The Government welcomes this publication. “It will promote the wider conversation about the role of technology in asset management and signals that the UK is open to innovation and ready for new and exciting businesses in the future.”

This follows recent news that UK investment firms are bolstering their staff specializing in digital assets.

On September 10, Cointelegraph reported that a quarter of asset managers and hedge funds in the US, UK and Europe have appointed senior executives to oversee digital asset strategies.

According to a survey, 24% of asset management firms have adopted a digital asset strategy, with an additional 13% planning to do so in the next two years.

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