Following a new paper released on Tuesday, a U.K. government-backed technology working group is advising companies to implement tokenization plans in tandem with their peers.
The process of digitising physical assets, mostly via blockchain technology, is known as tokenization. To enhance the effectiveness of established markets, financial institutions globally are testing tokenization and associated settlement methods.
The working group states that on-chain fund settlement using digital money should be the main priority, based on comments from the sector. Furthermore, funds have to be able to use public permissioned networks, which let verified users access the blockchain, and hold tokenized assets.
The Financial Conduct Authority, which oversees all aspects of the nation’s financial industry, including cryptocurrency, and the U.K. government’s finance branch are among the members of the Technology Working Group. The group’s November study, which called for regulators to provide tokenization with more clarity as businesses show interest in it, is expanded upon in this latest research.
An additional benefit of tokenizing money market fund units used as collateral, according to the research, is that it may “accelerate the relevant settlement process increasing the opportunities for this use case.”
According to the report, the government will keep talking to businesses about the potential advantages of integrating distributed ledger technology into sovereign bonds. The third phase of the group’s work will centre on artificial intelligence.