UK Investment Managers Embrace Blockchain for Fund Tokenization, Backed by Regulators
Summary:
UK investment managers are receiving regulatory backing to implement blockchain for fund tokenization, as part of the financial services digitalisation. This initiative is highlighted in a report by the Investment Association, which suggests tokenization will enhance transparency and efficiency in the sector. The Financial Conduct Authority also supports the move, but calls for clarity on potential risks. The report includes principles for tokenized fund implementation and outlines the need for relevant, competitive and efficient offerings for both domestic and global investors. The UK government has shown support for this innovative approach, signalling a welcoming stance towards future business innovations.
UK investment managers are getting regulatory backing to utilize blockchain technology for fund tokenization, a clear departure from traditional record-keeping systems. A fresh report issued by the Investment Association (IA) highlighted the brisk shift towards digital financial services. It opined that tokenization, or implementing units on distributed ledger technology (DLT), will pioneer a more streamlined and open financial sector.
Sarah Pritchard, the executive director of markets and international at the Financial Conduct Authority (FCA), underscored that although the regulator is eager to investigate innovative pathways for asset managers, it should also demarcate the possible threats. She stated, “This is a thrilling turning point and creates the opportunity for delving into much more ground-breaking use-cases in the days ahead. We aim to back firms in carrying out tech solutions that not only enhance but fortify the UK's asset management sector, while also grappling with risks and potential damages.”
Moreover, the report offered certain guidelines for instituting tokenized funds. These guidelines involve maintaining significance to both local and global investors and dodging a narrow focus strictly on the investment asset manager industry. The report emphasized the need for a comprehensive plan for implementation and gearing towards competitiveness and efficacy within the sector. Regarding the creation of the fund, it would have to be originated in the UK, attain FCA authorization, and maintain adherence to established financial industry standards. The rules governing legal and regulatory matters will continue to be the same.
The UK government, in a separate announcement, affirmed its endorsement for the blueprint model, pronouncing its resolve to advance innovative methodologies within the nation. The government welcomed this publication warmly, signaling that the UK is innovation-friendly and open to embracing the promising new business entities of the future.
This comes on the heels of news that UK investment firms have been beefing up their workforce dedicated to digital assets. A recent report revealed that one-fourth of asset managers and hedge funds across the US, UK, and Europe have onboarded senior executives to supervise digital asset strategies. As per a survey, 24% of asset management firms embraced a digital assets strategy, with an additional 13% considering it over the next two years.
Published At
11/25/2023 2:09:11 AM
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