UK moves to allow asset managers to use blockchain for fund tokenization

The United Kingdom’s Financial Conduct Authority (FCA) revealed a roadmap to help asset managers adopt blockchain technology for fund tokenization.

In a Tuesday announcement, the regulator said the initiative aims to “provide firms with additional clarity” to adopt tokenization and “drive innovation and growth in asset management.”

“Tokenization has the potential to drive fundamental changes in asset management, with benefits for the industry and consumers,” said Simon Walls, executive director of markets at the FCA. “There are many things that firms can do under our existing rules and more that become possible with the changes we propose enacting now,” he added.

According to the FCA, tokenized products can increase competition, reduce costs and broaden investment access, particularly to private markets and infrastructure. By digitizing fund operations, asset managers could also lower reconciliation and data-sharing costs.

Related: Tokenization needs guardrails, not just innovation

FCA outlines roadmap for tokenized funds

The plan includes guidance for operating tokenized fund registers under existing rules via the UK Blueprint model, a simplified dealing framework for processing both traditional and tokenized fund units and a roadmap for blockchain-based settlement.

The FCA also intends to explore how regulation may need to evolve as tokenization becomes more widespread. “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,” Walls said.

Last month, Coinbase asked users to support a public petition calling on the UK to develop a pro-innovation strategy for blockchain and stablecoins. The petition called for a framework including stablecoin and tokenization regulation, blockchain adoption and the appointment of a blockchain “czar.”

Related: BNY eyes blockchain for real-time tokenized payments

UK faces criticism over crypto policy

The UK’s approach to crypto regulation has drawn criticism from industry stakeholders. In June, analysts from the Official Monetary and Financial Institutions Forum (OMFIF), an independent think tank, warned that Britain has squandered its early lead in distributed ledger finance.

In July, Coinbase also released a satirical video titled “Everything is Fine,” taking aim at Britain’s financial system. The footage used lyrics and music that brag about the country’s strong finances while depicting scenes of inflation, poverty and financial struggles.