UK investment managers are receiving regulatory support to move away from traditional record-keeping systems and leverage blockchain technology to tokenize funds.
In a recent report published The Investment Association (IA) argued that fund tokenization, or issuing tokenized units or shares on distributed ledger technology (DLT), would increase efficiency and transparency in the financial industry.
In particular, the use of a real-time record-keeping system shared between all parties servicing a fund reduces fund administration costs, simplifies reconciliation processes, and reduces settlement times.
We are pleased to announce the first phase of @hmtreasury Asset Management Taskforce – Harnessing the potential of innovative technology The work of the Technology Working Group is complete. The UK Fund Tokenization Report, released today,… pic.twitter.com/thrudAZRqt
— Investment Association (@InvAssoc) November 24, 2023
Sarah Pritchard, executive director for markets and international at the Financial Conduct Authority (FCA), said that while regulators were open to exploring innovative avenues for asset managers, the potential risks were also clear. He emphasized the need to do so.
“This is an exciting milestone and paves the way for us to explore more innovative use cases in the future. We want to support companies that implement technological solutions that strengthen and strengthen their industries.”
Meanwhile, the report proposed certain principles for implementing tokenized funds.
These principles include ensuring relevance to domestic and international investors and avoiding a biased focus solely on the investment asset management industry.
“Rather than focusing on specific types of companies, product types, asset classes, or customer groups, we offer opportunities to the widest possible range of companies across sectors,” the report notes.
Furthermore, it made clear the need for an accompanying roadmap for delivery and a focus on competitiveness and efficiency within the sector.
The fund must be established in the UK, authorized by the FCA and follow traditional financial industry standards. He also said that the legal and regulatory rules remain unchanged.
separately statementthe UK Government reiterated its support for the Blueprint model and committed to improving innovative approaches in the country.
“The Government warmly welcomes this publication. It will encourage wider debate on the role of technology in wealth management and demonstrate that the UK welcomes innovation and is open to the exciting new businesses of the future. I guess.”
Related: Token adoption increases as real-world assets move on-chain
This follows recent news that the UK investment firm is ramping up its staff dedicated to digital assets.
On September 10, Cointelegraph reported that a quarter of asset managers and hedge funds in the US, UK, and Europe have hired senior executives to oversee their digital asset strategies.
Research shows that 24% of asset management firms have adopted a digital asset strategy, and a further 13% plan to implement one in the next two years.
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