The FCA has unveiled a plan to introduce tokenization in fund management to increase competition, reduce costs and stimulate innovation in the financial sector.
FCA launches fund tokenization roadmap for UK asset managers
The UK’s financial regulator (FCA) has unveiled a roadmap to help asset managers adopt blockchain and fund tokenization.
The initiative aims to “provide greater clarity for firms” and “support innovation and growth in asset management,” the FCA said in a statement.
“Tokenization has the potential to fundamentally transform the asset management industry, benefiting both firms and consumers,” said Simon Walls, FCA’s chief executive of markets.
How tokenization will change fund management
The regulator stressed that tokenized products can increase competition, reduce costs and expand access to investment – particularly in private markets and infrastructure.
Digitizing fund operations will also reduce the costs of data reconciliation and information sharing.
What the FCA roadmap includes
The plan includes three key areas:
- Tokenized fund registries operating under existing rules through the UK Blueprint Model.
- A simplified transaction processing model that will combine traditional and tokenized fund units.
- A roadmap for blockchain settlement, which will allow settlements to be made directly on a distributed ledger.
The FCA will also examine how the regulatory framework should evolve as tokenization becomes more widespread.
“The UK has the opportunity to become a world leader in this area,” Walls stressed. “Our task is to give asset managers clarity and confidence to act.”
Context: Industry pressure and financial regulatory reform
Last month, Coinbase launched a petition calling for a “pro-innovation strategy” for blockchain and stablecoins in the UK. The document proposes introducing a regulatory framework for tokenization, stablecoins and appointing a “blockchain coordinator”.
OMFIF analysts have previously criticized the government, saying that the UK has lost its leadership in DLT finance.
Coinbase, in turn, published a satirical video “Everything is Fine” in July, which mocks the country’s financial policies.
Crypto asset market liberalization
Under pressure from the industry, the FCA has begun to open up the market:
- last week, the regulator lifted a 2019 ban on trading crypto ETNs for retail investors;
- The Bank of England is considering easing restrictions on corporate reserves in stablecoins to support companies with large fiat reserves.
Related: UK looks to US crypto stance to boost innovation, investment
