The Financial Conduct Authority (FCA) has revealed its commitment to a tokenisation push in UK asset management through a consultation document published today.
Its plans will include new clarity around tokenisation to encourage its adoption in the UK, which, according to its trade body, could be “transformative”.
“The UK has the opportunity to be a world-leader here and we want to provide asset managers with the clarity and confidence they need to deliver,” said Simon Walls, executive director of markets at the FCA.
As investment strategies evolve, tokenisation, the digital representation of assets on distributed ledger technology, is emerging as a key tool for asset managers seeking to drive innovation and maintain a competitive edge, according to the regulator.
Within the proposals is a roadmap to tackle barriers such as on-chain settlement and the use of public blockchains, alongside a discussion on how tokenisation models and regulation may evolve.
There will also be guidance on operating tokenised fund registers under the UK Blueprint model, and a simplified dealing framework for trading units in both traditional and tokenised authorised funds.
John Allan, head of the innovation and operations unit at the Investment Association said the move had the potential to be transformative for the UK fund market.
“The IA has a track record of championing innovation through tokenisation to benefit investors. The FCA’s proposals – embracing public chains, the use of stablecoin, and introducing Direct2Fund – signal a clear shift in thinking and confirms its stance as a tech positive, innovation-supporting regulator,” said Allan.
“We look forward to continuing the co-creation of a tokenisation regulatory framework with FCA for a new version of the fund – Investment Fund 3.0 – that is customer focused and able to adapt to future developments in digital markets.”
Tokenisation could also open up private markets and infrastructure investments to a broader range of investors, delivering more affordable and tailored investment opportunities for consumers.
Rahul Bhushan, global head of investment products at ARK Invest Europe, noted that: “Blockchain-based instruments, including stablecoins, can modernise settlement and broaden access in a responsible way, which aligns with the FCA’s roadmap.”
“We have seen blockchain as a key innovation theme for many years and we believe tokenisation has the potential to streamline operations, reduce costs, and widen access to investment opportunities, making asset management more efficient across the value chain,” said Bhushan.
At Capital Pioneer’s inaugural Summit on October 6, Mhairi Jackson, asset management policy manager at the FCA, previewed the consultation’s publishing.
“With £14trn in UK-managed assets, the country must evolve to meet the expectations of younger investors who want instant liquidity and transparency in today’s market,” she told delegates. “We need products and infrastructure to support that generation as they invest in the years ahead,” Jackson said.
Read the full story here: UK eyes tokenisation leadership – Capital Pioneer
For more information on the FCA’s consultation, visit its dedicated website.
