The Financial Conduct Authority (FCA) has laid out plans to back tokenisation in asset management, hoping to drive innovation and growth in the sector. Central to these plans is guidance that gives firms clearer direction and helps them adopt this technology more easily.
The UK remains a leading hub for asset management, home to around 2,600 firms managing £14 trillion in assets for clients at home and abroad. As part of its strategy, the FCA has reiterated its commitment to backing innovation so the sector can keep growing.
Tokenisation, the digital representation of assets on distributed ledger technology, gives asset managers new ways to innovate and stay competitive as investing evolves. The FCA says tokenised products could boost competition, give consumers more choice, and open new ways to distribute funds, including to those just starting out. The technology could also make private markets and infrastructure investments easier to access, letting consumers tap into options that are more affordable and better suited to their needs.
Tokenisation in asset management can also make fund operations more efficient and lower management costs. By simplifying how firms share and reconcile data when operating or distributing funds, managers could save funds. The FCA has been actively collaborating with industry participants to realise these advantages in the UK market.
Simon Walls, executive director of markets at the FCA, commented: “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 encompass several key initiatives:
- Guidance on operating tokenised fund registers under current FCA rules through the UK Blueprint model.
- A streamlined, alternative dealing model for fund managers to handle buying and selling of units in authorised funds, whether traditional or tokenised.
- A roadmap to advance fund tokenisation, tackling issues like public blockchain use and entire settlement on blockchain.
- A discussion on the ways tokenisation models could evolve and what regulatory changes might follow.
This consultation is part of the FCA’s digital assets roadmap, showing its commitment to modernising UK asset management.