UK Funds Given Approval To Begin Tokenisation Efforts

The group, which was established earlier this year, has today (24 November) published a roadmap for the adoption of distributed ledger technology through fund tokenisation.

The report, UK Fund Tokenisation - A Blueprint for Implementation, outlined a baseline model for the implementation of tokenisation that can be used within the existing legal and regulatory framework.

JP Morgan and Apollo unveil tokenisation project to expand access to private assets

This means funds can now implement a baseline approach to tokenisation, providing they meet certain characteristics. These include funds being comprised of mainstream investment assets, while still providing valuations and settlement through the same processes and timeframes.

In the new model, tokenised funds will be "highly recognisable and consistent with mainstream funds that exist today", the report said, while utilising distributed ledger technology (DLT) for sales and redemption transactions and acting as the register of holders.

Adam Belding, CTO of Calastone, argued that DLT was a "powerful platform for providing, managing, securing and distributing tokenised assets", adding that he believed it will "unlock meaningful improvements in operational efficiency and product innovation in the funds industry".

"To truly transform the process of investing, the industry needs to think about tokenisation not as a new technology, but as a transformative tool to create a frictionless digital marketplace for asset management," he added.

Deep Dive: Tokenisation represents 'paradigm shift' for asset management

Michelle Scrimgeour, chair of the working group and CEO of Legal & General Investment Management, said: "Today marks a milestone in the implementation of tokenisation within the UK's fund industry.

"Fund tokenisation has great potential to revolutionise how our industry operates, by enabling greater efficiency and liquidity, enhanced risk management and the creation of more bespoke portfolios."

Sarah Pritchard, executive director of markets and international at the Financial Conduct Authority, added: "At the FCA, we are committed to helping strengthen the UK's position in global wholesale markets and want to embrace the opportunities presented by new technology and innovation.

"We welcome the report today which identifies a way forward for tokenisation and has concluded that there are no significant regulatory barriers to the adoption of the proposed baseline model."

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