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.
Allan Trimmer, Head of Alternatives Product at Aberdeen, said:
“As an early adopter of tokenisation, with tokenised interest in our Money Market Fund being made available through Archax since June 2023, Aberdeen is hugely supportive of the FCA’s intention to add clarity to the use of fund tokenisation helping support innovation while protecting consumers.
“The consultation covers a number of areas that are critical to maintaining progress around tokenisation within asset management, including the need for standardisation around the issuance and use of tokens, exploring the use of stable coins to drive greater speed and efficiency of transactions and examining the forward looking stages of tokenisation which have the potential to shape the end-to-end Investment Management lifecycle of the future.
“Making sure these aspects deliver better outcomes for clients is central to our thinking and we look forward to participating in the consultation.”
