UK fund managers seek regulatory approval for fund tokenization: report
Asset managers in the UK are pushing for mutual fund tokenization to gain regulatory approval in the country. The Investment Association, the trade body representing asset managers in the UK, has asked the Financial Conduct Authority (FCA) to speed up regulatory approval for blockchain-traded funds.
The Financial Times reports that the trade body, whose members oversee more than £10 trillion (over $11.9 trillion) in assets for clients around the world, believes blockchain technology can be used to bring greater efficiency, cost savings and transparency to mutual funds.
With blockchain technology, traditional stocks or fund shares will be replaced by issuing digital tokens to investors. According to the Investment Association, this will remove the currently laborious processes involved in buying and selling mutual funds.
The Investment Association has also proposed the creation of a working group that will explore other possible uses of blockchain technology. These include the use of DLT (Digital Ledger Technology) to create new products and services and allow investors to customize their portfolios with stakes in private companies and digital assets.
Additionally, the lobbying effort calls for mutual funds to be allowed to hold digital assets in their portfolios. Chris Cummings, chief executive of the Investment Association, said regulation was needed to spur innovation and make the country’s fund industry globally competitive.
“Greater innovation will boost the overall competitiveness of the UK funds industry and improve the cost, efficiency and quality of the investment experience,” Cummings said.
The London Stock Exchange and four global asset managers are already working with FundAdminChain, a fintech group, to develop live tokenized funds for the UK market.
The FCA could introduce regulations for funds traded on the blockchain towards the end of the second quarter of 2023 if the FCA speeds up the approval process, according to the report.
Tokenization regulations already in other jurisdictions
Several other countries are already ahead in the race to regulate the tokenization of traditional assets. One such country is Germany, which has established regulations for banking and non-banking businesses that want to offer tokenized securities or security token offerings (STOs), as it is called in the regulations.
Meanwhile, the SEC approved the first U.S. mutual fund traded on Franklin Templeton’s blockchain in December 2021 after the company convinced it that the fund had no exposure to digital assets.
In the Central African Republic (CAR), the second country to adopt digital currency as legal tender, plans are underway to introduce tokenization of the country’s natural resources. This will open the country’s shores to investors, the government believes.
The UK has announced plans to become more welcoming to digital assets as it hopes to become a global hub for the industry. The UK intends to do this by establishing regulations for all aspects of the industry.
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