The Financial Conduct Authority (FCA), the UK’s financial regulator, has announced plans to support the use of tokenisation in the asset management sector, aiming to boost efficiency, innovation, and competition across the industry.
The initiative forms part of the FCA’s broader strategy to encourage technological adoption and growth in the UK’s asset management market, which is one of the largest globally, with around 2,600 firms managing £14tn in assets for domestic and international clients. The regulator said its latest proposals are designed to give firms greater clarity on how they can adopt distributed ledger technology (DLT) while staying compliant with existing regulations.
The FCA believes tokenisation – the digital representation of assets on distributed ledger technology – can help firms innovate and remain competitive as the investment landscape evolves. By enabling tokenised funds, the regulator aims to promote competition, broaden investment access, and enhance consumer choice. The technology also has the potential to make investing more inclusive by opening up new channels for fund distribution, particularly to retail investors and those new to investing.
Beyond accessibility, tokenisation could also drive significant cost and efficiency benefits across the fund management ecosystem. The FCA noted that the use of DLT could reduce operational expenses by simplifying data reconciliation processes between different parties involved in managing or distributing funds. The regulator has been working closely with industry stakeholders to realise these potential advantages for UK asset managers.
The FCA’s proposed framework includes several key elements. Among them is new guidance for operating tokenised fund registers under the existing rules through the UK’s “Blueprint” model. It also outlines an alternative, streamlined dealing model for buying and selling units in both traditional and tokenised authorised funds. Additionally, the roadmap explores solutions for overcoming key barriers, such as using public blockchains and enabling full transaction settlement on the blockchain.
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 also plans to continue discussions with industry partners on how tokenisation models could evolve further and what regulatory adjustments may be required in the future.
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