UK investment funds have been granted the approval to develop tokenisation, following the formation of a government taskforce on asset management earlier this year. This announcement comes after the publication of a report on tokenisation by the Technology Working Group of the Government’s Asset Management Taskforce, as shared by the Investment Association (IA) in a press release.
The ‘UK Fund Tokenisation – A Blueprint for Implementation’ report includes input from HM Treasury and the Financial Conduct Authority (FCA) and provides a roadmap on the use of distributed ledger technology (DLT) for fund tokenisation in the UK.
According to Michelle Scrimgeour, Chair of the Working Group and CEO at Legal & General Investment Management, allowing tokenised funds to adopt DLT in their operations, from sales to redemptions, has the potential to open the industry to further growth. She commented that “today marks a milestone in the implementation of tokenisation within the UK’s fund industry. Fund tokenisation has great potential to revolutionise how our industry operates, by enabling greater efficiency and liquidity, enhanced risk management and the creation of more bespoke portfolios”.
The FCA welcomed the Working Group’s report, noting that it sets out guidelines on adoption of tokenisation models within the UK’s current legal and regulatory framework. Sarah Pritchard, FCA’s executive director of Markets and International, said: “We welcome the report today which identifies a way forward for tokenisation and has concluded that there are no significant regulatory barriers to the adoption of the proposed baseline model”.
This announcement follows shortly after the UK Finance Minister Jeremy Hunt proposed legislation for the country’s Digital Securities Sandbox, which aims to promote digital assets use in financial markets. Together with the passage of a key markets law recognizing crypto trading as regulated activity, and the FCA’s recently outlined Digital Sandbox, the industry is seeing milestones that align with the UK’s quest to become the global hub for blockchain and web3 innovation.