The UK's Financial Conduct Authority (FCA) has set out plans to support tokenisation in asset management, arguing that the technology can drive innovation and growth in the sector.
The UK is a leading asset management hub, with around 2,600 firms managing £14 trillion of assets for clients. The FCA say that, as the way people invest changes in the future, tokenisation - digital representation of assets on distributed ledger technology - can help asset managers to innovate and stay competitive.
"Tokenised products could drive competition and increase choice for consumers - and open up new ways to distribute funds, including to those new to investing," says the watchdog in a consultation paper.
Tokenisation also offers opportunities to improve efficiencies and reduce the costs of fund management, for example, by lowering the costs of sharing and reconciling data between firms involved in operating or distributing the fund.
To encourage take-up of the technology, the FCA will issue guidance on operating tokenised fund registers under current FCA rules through the UK Blueprint model. It is also planning a streamlined, alternative dealing model for fund managers to process buying and selling of units in authorised funds, whether traditional or tokenised.
A roadmap is being prepared to advance fund tokenisation and address barriers like using public blockchains and settling transactions entirely on the blockchain.
Simon Walls, executive director of markets, FCA, says: "Tokenisation has the potential to drive fundamental changes in asset management, with benefits for the industry and consumers...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."
Rahul Bhushan, global head, investment products, ARK Invest Europe, comments: "Blockchain-based instruments, including stablecoins, can modernise settlement and broaden access in a responsible way, which aligns with the FCA’s roadmap. However, successful adoption depends on clear regulatory alignment and responsible implementation to ensure transparency, interoperability, and investor confidence."