UK investment managers receive backing from regulatory bodies to embrace blockchain technology for tokenizing funds, departing from traditional record-keeping methods. The Investment Association (IA) released a recent report advocating for fund tokenization, asserting that issuing tokenized units or shares on distributed ledger technology (DLT) would revolutionize the financial industry by enhancing efficiency and transparency.
The IA report emphasized the transformative potential of real-time record-keeping systems shared among all fund stakeholders. It highlighted significant benefits such as cost reduction in fund administration, streamlining reconciliation processes, and facilitating faster settlement times.
Sarah Pritchard, the Financial Conduct Authority’s (FCA) executive director of markets and international affairs, expressed the regulator’s openness to exploring innovative avenues for asset managers. However, she stressed the importance of assessing associated risks. Simultaneously, the report outlined fundamental principles for implementing tokenized funds, advocating for inclusivity across diverse sectors rather than a narrow focus on specific entities or customer groups.
Tokenized Funds Mandate UK Establishment and FCA Compliance
The proposed principles underscored the need for relevance to domestic and international investors, emphasizing the importance of a comprehensive delivery roadmap and prioritizing competitiveness and efficiency within the sector. Additionally, it mandated adherence to UK establishment, FCA authorization, and compliance with traditional financial industry standards while maintaining unchanged legal and regulatory rules.
According to a recent report, the UK government has recapped its commitment to promoting innovation within the country’s asset management industry. It praised the IA’s publication as a catalyst for advancing the role of technology in asset management. This portrays the UK as a welcoming environment for innovative ventures.
These developments come on the heels of recent reports indicating that investment firms in the UK have been bolstering their digital asset-focused personnel. Notably, a quarter of asset managers and hedge funds in the US, UK, and Europe have onboarded senior executives dedicated to overseeing digital asset strategies.
The survey found that 24% of asset management firms have already implemented strategies for managing digital assets, while another 13% plan to do so within the next two years. This increase in interest highlights the growing popularity of digital asset management strategies in the financial industry.