The UK funds industry has received a major boost with the approval for the development of tokenisation models. This announcement came after the Technology Working Group of the Government’s Asset Management Taskforce published a report on UK fund tokenisation. The report received 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.
The Investment Association (IA) highlighted that the report, titled ‘UK Fund Tokenisation – A Blueprint for Implementation,’ marks a milestone for the UK funds industry. Michelle Scrimgeour, Chair of the Working Group and CEO at Legal & General Investment Management, stated that allowing tokenised funds to adopt DLT in their operations, from sales to redemptions, has the potential to open the industry to further growth. She emphasized that fund tokenisation has the potential to revolutionize how the 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 and noted that it sets out guidelines on the adoption of tokenisation models within the UK’s current legal and regulatory framework. Sarah Pritchard, FCA’s executive director of Markets and International, expressed support for the report and stated that it identifies a way forward for tokenisation and has concluded that there are no significant regulatory barriers to the adoption of the proposed baseline model.
The announcement comes at a time when the UK government is showing support for innovation in the financial sector. UK Finance Minister Jeremy Hunt recently proposed legislation for the country’s Digital Securities Sandbox, aiming to promote the use of digital assets in financial markets. This initiative aligns with the UK’s quest to become a global hub for blockchain and web3 innovation.
In addition to the approval for tokenisation development, the UK has also seen other significant developments in the digital assets space, such as the passage of a key markets law recognizing crypto trading as a regulated activity and clarity on stablecoin regulation.
Overall, the approval for UK funds to develop tokenisation models represents a significant step forward for the industry and sets the stage for further innovation and growth in the UK’s financial sector.