Investment managers in the UK are moving away from traditional record-keeping systems by using blockchain technology to tokenize funds with regulatory support.
The Investment Association stated in a recent research that the financial industry will become more transparent and efficient as a result of fund tokenization, which is the process of issuing tokenized units or shares on distributed ledger technology (DLT).
Specifically, the adoption of a real-time record-keeping system that is accessible to all parties involved in the fund’s service will lower the expenses associated with fund administration and streamline the reconciliation procedure, enabling faster settlement timeframes.
The Financial Conduct Authority (FCA), according to Sarah Pritchard, executive director of markets and international, is willing to investigate new opportunities for asset managers, but it also needs to outline the dangers involved.
“This is an exciting milestone and paves the way for exploring more transformative use cases in the future. We want to support firms to implement technological solutions which enhance and strengthen the UK’s asset management industry, while addressing risks and potential harms.”
Concurrently, the paper put forth a few guidelines for putting tokenized monies into practise.
These guidelines include avoiding a restricted focus that is exclusive to the investment asset manager sector and making sure that the information is relevant to both domestic and foreign investors.
“Provide opportunities to as many firms as possible in the industry, instead of concentrating on any particular kind of firm, product category, asset class, or clientele,” the research advised.
It also made clear the necessity of a delivery roadmap that goes along with it and the importance of efficiency and competitiveness in the industry.
In addition to following known financial sector norms, the fund would need to be authorised by the FCA and created in the United Kingdom. It went on to say that the laws and regulations will not change.
The British government issued a statement in which it restated its endorsement of the blueprint concept and reaffirmed its dedication to fostering creative thinking in the country:
“This publication is highly welcomed by the government. It will further the discussion on the function of technology in asset management and demonstrate to the world that the UK is open to new ideas and innovative, interesting ventures.
This comes after reports that U.K. financial firms have been increasing the number of employees devoted to digital assets.
According to a research published on September 10 by Cointelegraph, 25% of asset managers and hedge funds in the United States, United Kingdom, and Europe have hired senior executives to supervise their digital asset strategies.
A poll found that 24% of asset management companies had implemented a digital assets strategy, and another 13% intended to do so within the next 24 months.