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Regulators grant permission for asset managers in the UK to introduce 'tokenised' investment funds.

Updated: Jan 9

The Treasury endorses a plan for implementing blockchain technology, which experts believe will reduce expenses for investors in the long run.

UK asset managers have received government support to experiment with blockchain technology and develop tokenised versions of their funds.

An industry working group, led by trade group the Investment Association, has published a blueprint for regulated funds in the UK to put their assets on digital ledgers.

The move reflects the increasing interest among large institutional investors to leverage the technology behind cryptocurrencies by tokenising their funds.

This process involves transforming the fund into a legal digital version that resides on a shared ledger, enabling efficient tracking and maintenance of ownership history, transactions, trading, and regulatory details.

Tokenisation has the potential to facilitate easier and cheaper buying and selling of funds, enhance risk management, and streamline back-office operations.

The guideline issued by the working group permits FCA-authorised asset managers to tokenise funds containing mainstream investment assets, as long as valuations and settlements are conducted through existing processes and timeframes.

While global asset managers have largely disregarded concerns related to cryptocurrency market scandals, demand for tokenised funds has been slower to emerge due to the complexity of creating digital securities.

The report received support from the FCA and concluded that there are no significant regulatory barriers to adopting the proposed baseline model for tokenisation.


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