Capital markets News

UK to publish fund tokenization blueprint this year

fca fund tokenization

The Chair of the UK’s Financial Conduct Authority (FCA), Ashley Alder, said a blueprint for fund tokenization would be released later this year. Earlier this year, the FCA published a discussion paper on improving asset management, including the potential for tokenization.

There’s already been a tech sprint with the industry on the topic of distributed ledger technology (DLT) to test potential rule changes.

A common theme with asset management and tokenization is the global nature of markets. Hence, the FCA wants the UK’s rules to interact with those in other jurisdictions and avoid complexity.

The February consultation hinted that it doesn’t want to jump directly to tokenize retail investor funds. Instead, it sees a path forward as first using DLT in wholesale use cases involving institutions or retail investment platform providers. It mentioned ‘longer term’ tokenizing ‘some’ private fund units.

Consistent with that approach, during yesterday’s speech to the Investment Association, Adler reiterated the potential DLT use cases “even if direct marketing of tokens may be some time off.”

An overarching theme of his talk was the proportionality of rules. That includes the size of the investment firms and the nature of the market, whether institutional or retail.

Meanwhile, UK asset managers are already proceeding with tokenization. In June, Abrdn tokenized a money market fund on the Hedera public DLT. At the time, it said that existing Abrdn permissions covered the regulated security. And Schroders is experimenting with a deeper level of tokenization with Calastone in a Singapore sandbox.

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