The Financial Conduct Authority (FCA) has set out plans to
support tokenisation, to drive innovation and growth in asset
management.
The plans include guidance to provide firms with additional
clarity to aid adoption of this new technology.
The UK is a leading asset management hub, with around 2,600 firms
managing £14 trillion of assets for UK and global clients. The
FCA is committed to supporting innovation to help the sector
continue to grow, as set out in its strategy.
As the way people invest changes in the future, tokenisation –
digital representation of assets on distributed ledger technology
– can help asset managers to innovate and stay competitive.
Tokenised products could drive competition and increase choice
for consumers – and open up new ways to distribute funds,
including to those new to investing.
Tokenisation also has the potential to broaden access to private
markets and infrastructure investment and ultimately help
consumers access more cost-effective and personalised
investments.
It offers further opportunities to improve efficiencies and
reduce the costs of fund management, for example, by lowering the
costs of sharing and reconciling data between firms involved in
operating or distributing the fund. The FCA has been actively
working with industry to deliver these benefits for asset
managers in the UK.
Simon Walls, executive director of markets at the FCA, said:
“Tokenisation has the potential to drive fundamental changes in
asset management, with benefits for the industry and consumers.
There are many things that firms can do under our existing rules
and more that become possible with the changes we propose
enacting now. We stand ready to design the next stage with the
industry – this publication suggests a path. 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.”
The FCA's proposals include:
- Guidance on operating tokenised fund registers under current
FCA rules through the UK Blueprint model.
- A streamlined, alternative dealing model for fund managers to
process buying and selling of units in authorised funds, whether
traditional or tokenised.
- A roadmap to advance fund tokenisation and address key
barriers like using public blockchains and settling transactions
entirely on the blockchain.
- A discussion on how tokenisation models could evolve and how
regulation may need to change.
This consultation also supports the delivery of the FCA's roadmap
for digital assets.
Notes to editors
- The roadmap for digital assets meets the commitment we set
out in our letter to the Prime
Minister on growth.
- Tokenisation is a method of digitally representing an asset
or its ownership by recording it using distributed ledger
technology (DLT). DLT is a system that stores transaction records
across multiple locations at once, rather than relying on a
single, centralised database.
- Read more on the FCA's work on fund tokenisation.
