A UK investment fund has received approval for tokenization as the UK government is keen to leverage blockchain technology in the asset management industry, according to The Investment Association.
Fund tokenization has the potential to improve the efficiency, transparency and international competitiveness of the investment management sector, the investment association said in a statement.
Working with the UK Treasury, the Financial Conduct Authority (FCA) and investment managers such as BlackRock, the initial steps were announced today as part of the Technical Working Group of the Government Asset Management Taskforce Roadmap. The report “UK Fund Tokenization – A Blueprint for Implementation” outlines a basic model for tokenization designed to work within existing legal and regulatory frameworks that companies can implement immediately.
This model allows FCA-approved funds to adopt tokenization for sale and redemption transactions if they meet certain criteria, such as an investment portfolio consisting only of mainstream investment assets and maintaining existing valuation and settlement processes.
“Fund tokenization has great potential to transform the way the industry operates by increasing efficiency and liquidity, enhancing risk management and creating more customized portfolios.” Michelle Scrimgeour, Working Group Chair and Chief Executive Officer, Legal & General Investment Management, said: “It’s important that the UK remains at the forefront of technological advancements.”
Sarah Pritchard, Managing Director Markets and International at the FCA, added: “We welcome today’s report, which identifies the way forward for tokenization and concludes that there are no significant regulatory barriers to adoption of the proposed underlying model.”
UK Digital Securities Sandbox
The news comes after UK Chancellor of the Exchequer Jeremy Hunt earlier this week outlined legislation to expand the country’s digital asset sector through the Digital Securities Sandbox initiative.
The Digital Securities Sandbox aims to drive the adoption of digital assets across financial markets and is scheduled to launch in the first quarter of 2024. It differs from the FCA’s Digital Sandbox (launched in August), which aims to support companies in the early stages of digital product development. .
Last June, UK Chancellor Rishi Sunak announced plans to provide regulatory clarity on how cryptocurrency companies must register and operate in the UK and transform the UK into a Web3 hub.
The UK is not the only country looking to advance fund tokenization, with JPMorgan collaborating with asset managers and cryptocurrency projects including WisdomTree, Apollo, Avalanche, LayerZero Labs and Axelar on proof-of-concept blockchain interoperability for investment portfolios. Management last week.
The collaboration, under the Monetary Authority of Singapore’s Project Guardian initiative, is designed to enable fund managers to tokenize, purchase and rebalance real-world asset positions across multiple blockchains.
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