Financial regulators in the United Kingdom have approved the underlying model and started preparing a roadmap for introducing tokenization of investment fund assets.
The U.K. Treasury, the Financial Conduct Authority (FCA), and leading investment firms represented by The Investment Association have published a plan to implement fund tokenization for asset management companies. The U.K. government has already formed a working group to develop a roadmap for the project’s implementation.
The tokenization process involves issuing tokens based on distributed ledger technology (DLT) that represent shares of the underlying assets. According to the document, the issuing company must be licensed by the FCA and comply with traditional financial industry standards. Legal and regulatory rules for tokenized assets will be in line with U.K. financial market standards.
The authors of the project believe that tokenization will help move away from traditional record-keeping systems and contribute to the growth of efficiency and transparency of transactions in finance. In particular, the use of a common blockchain system for all parties servicing the fund will allow for real-time accounting, reduce the cost of fund management, simplify approval processes, and shorten settlement times.
The document formulates basic principles for the implementation of tokenized funds, which are relevant for local and international companies and not limited to application exclusively in the context of investment asset management.
A month earlier, the project of investment fund tokenization was launched by UBS, the largest bank in Switzerland. This initiative was part of the international Project Guardian, led by the Monetary Authority of Singapore (MAS).
