The UK’s Financial Conduct Authority (FCA) has unveiled a roadmap to help asset managers implement blockchain technology for fund tokenization.
The regulator said in an announcement on Tuesday that the initiative aims to “provide further clarity to businesses” over the introduction of tokenization and “foster innovation and growth in asset management.”
Simon Walls, executive director of markets at the FCA, said: “Tokenisation has the potential to drive fundamental change in asset management, benefiting the industry and consumers.” He added: “There’s a lot businesses can do under existing rules, and even more with the changes we’re proposing to enact now.”
According to the FCA, tokenized products have the potential to increase competition, reduce costs and increase access to investment, particularly in private markets and infrastructure. By digitizing fund management, asset managers may also be able to reduce coordination and data sharing costs.
Related: Tokenization requires guardrails as well as innovation
FCA outlines roadmap for tokenized funds
The FCA’s plans include guidance for operating a tokenized funds register under existing rules via the UK Blueprint model, a simplified trading framework for processing both traditional and tokenized funds units, and a roadmap for blockchain-based payments.
Regulators will also examine how regulations need to evolve as tokenization becomes more widespread. “The UK has an opportunity to be a world leader here and we want to give asset managers the transparency and confidence they need,” Mr Walls said.
Last month, Coinbase asked its users to support a national petition calling on the UK to develop a strategy to promote blockchain and stablecoin innovation. The petition calls for the creation of a framework that includes regulation of stablecoins and tokenization, blockchain adoption, and the appointment of a blockchain “emperor.”
Related: BNY looks to blockchain for real-time tokenized payments
UK faces criticism over crypto policy
The UK’s approach to regulating cryptocurrencies has drawn criticism from industry insiders. Analysts at the independent think tank Official Monetary and Financial Institutions Forum (OMFIF) warned in June that the UK was losing its early lead in distributed ledger finance.
Coinbase also released a satirical video in July titled “Everything is Fine” that targeted the UK financial system. The video featured lyrics and music that boasted about the country’s strong finances, depicting scenes of inflation, poverty, and financial struggles.
It appears that industry pressure is paying off. The FCA last week lifted a 2019 ban on cryptocurrency exchange-traded notes (ETNs) for retail investors, allowing them to be traded on FCA-approved UK-based exchanges.
Additionally, the Bank of England will reportedly consider exemptions for companies that require larger fiat-backed reserves and ease proposed restrictions on companies holding stablecoins.
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