UK funds given the green light for tokenisation development
UK authorised funds have been given the green light to develop tokenisation, following the establishment of the new Technology Working Group of the Government's Asset Management Taskforce earlier this year to harness the potential of innovative technologies for the UK asset management industry.
Through close engagement with HM Treasury and the Financial Conduct Authority (FCA), the Working Group has today published its roadmap for the adoption of distributed ledger technology (DLT) through fund tokenisation in its report, 'UK Fund Tokenisation - A Blueprint for Implementation'.
Marking a step change in investment fund innovation, fund tokenisation has the potential to improve operational efficiency, transparency, and international competitiveness in the sector. The first stage, outlined today, provides a baseline model for the implementation of tokenisation, that can be used within the existing legal and regulatory framework, and which investment management firms can implement immediately.
In this initial stage, FCA authorised funds can implement a baseline approach to tokenisation, as long as they meet certain characteristics, for example their investment portfolio must comprise mainstream investment assets and continue to provide valuations and settlement through the same processes and timeframes. In this model, tokenised funds would be highly recognisable and consistent with mainstream funds that exist today, while utilising DLT for sales and redemption transactions and acting as the register of holders.
Michelle Scrimgeour, Chair of the Working Group and Chief Executive Officer at Legal & General Investment Management, said:
“Today marks a milestone in the implementation of tokenisation within the UK’s fund industry. Fund tokenisation has great potential to revolutionise how our industry operates, by enabling greater efficiency and liquidity, enhanced risk management and the creation of more bespoke portfolios.
“The partnership and collaboration between the investment management industry, the FCA and HM Treasury has created strong momentum for change, which is essential to deliver the innovation we need. It is vital the UK remains at the forefront of technological development. In my role as Chair, it has been a real pleasure to see the breadth and depth of expertise the UK has to offer in adopting and leveraging the technology that we believe will underpin the next generation of asset management.”
Sarah Pritchard, Executive Director, Markets and Executive Director, International at the FCA said:
“At the FCA we are committed to helping strengthen the UK’s position in global wholesale markets and want to embrace the opportunities presented by new technology and innovation. We welcome the report today which identifies a way forward for tokenisation and has concluded that there are no significant regulatory barriers to the adoption of the proposed baseline model. We look forward to continuing our close collaboration with the industry as this work progresses.”
Notes to Editor
HM Treasury acts as the Secretariat to the Asset Management Taskforce, which is chaired by the Economic Secretary to the Treasury and City Minister. The Investment Association (IA) acts as the Secretariat to the Technology Working Group, which reports to the Asset Management Taskforce.
For further information, please contact:
Helen Ayres, Head of Communications: [email protected]
T: +44 (0)20 7269 4620
Arianna Schardt, Communications Executive: [email protected]
T: +44 (0)20 7269 4625
IA Press Office: [email protected]
About the Investment Association (IA):
- The IA champions UK investment management, supporting British savers, investors and businesses. Our 250 members manage £8.8 trillion of assets and the investment management industry supports 126,400 jobs across the UK.
- Our mission is to make investment better. Better for clients, so they achieve their financial goals. Better for companies, so they get the capital they need to grow. And better for the economy, so everyone prospers.
- Our purpose is to ensure investment managers are in the best possible position to:
- Build people’s resilience to financial adversity
- Help people achieve their financial aspirations
- Enable people to maintain a decent standard of living as they grow older
- Contribute to economic growth through the efficient allocation of capital.
- The money our members manage is in a wide variety of investment vehicles including authorised investment funds, pension funds and stocks and shares ISAs.
- The UK is the second largest investment management centre in the world, after the US and manages 37% of all assets managed in Europe.