UK’s FCA Unveils Roadmap to Support Blockchain-Based Fund Tokenization

The UK Financial Conduct Authority (FCA) has unveiled a roadmap to help asset managers adopt blockchain technology to tokenize funds.

On Tuesday advertisementThe initiative aims to “provide companies with greater clarity” to adopt tokenization and “drive innovation and growth in asset management,” the regulator said.

“Tokenization has the potential to fundamentally change asset management, with benefits for the industry and consumers,” said Simon Walls, the FCA’s executive director for markets. He added: “There are many things businesses can do under our current rules, and more that are made possible with the changes we are proposing to take effect now.”

According to the Financial Conduct Authority (FCA), tokenized products can increase competition, reduce costs and expand access to investment, especially to private markets and infrastructure. By digitizing fund operations, asset managers can also reduce settlement and data exchange costs.

Related to: Coding needs guardrails, not just innovation

The Financial Conduct Authority (FCA) sets the roadmap for tokenized funds

The plan includes guidance for operating tokenized money ledgers under existing rules across the UK Model Scheme, a simplified transaction framework for processing both traditional and tokenized money units and a roadmap for blockchain-based settlement.

The FCA also intends to explore how regulation will 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 achieve it,” 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 that includes regulation of stablecoins and tokens, blockchain adoption and the appointment of a blockchain “czar.”

Related to: BNY is looking to blockchain for real-time token payments

The UK is facing criticism over its encryption policy

The UK’s approach to regulating cryptocurrencies 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 had squandered its early progress on distributed book financing.

In July, Coinbase also released a satirical video titled “It’s All Right,” targeting Britain’s financial system. The clips used lyrics and music that boasted of the country’s strong financial resources while depicting scenes of inflation, poverty and financial struggles.

The industry pressure appears to have paid off. Last week, the Financial Conduct Authority (FCA) lifted its 2019 ban on exchange-traded securities (ETNs) for retail investors, allowing trading on UK-based FCA-approved exchanges.

Furthermore, the Bank of England is reportedly easing proposed limits on corporate holdings of stablecoins, taking into account exemptions for companies that need larger reserves backed by fiat currencies.

magazine: Hong Kong is not the loophole Chinese cryptocurrency companies think it is