UK fund managers push for regulatory approval for tokenization of funds: report

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Asset managers in the United Kingdom are lobbying for the tokenization of mutual funds to be given regulatory approval in the country. The Investment Association, the trade body representing asset managers in the U.K., has called for the Financial Conduct Authority (FCA) to speed up the approval of blockchain-traded fund regulations. 

The Financial Times reports that the trade body, whose members oversee more than £10 trillion (over $11.9 trillion) in assets for clients worldwide, believes that blockchain technology can be used to bring greater efficiency, cost savings, and transparency to mutual funds. 

With blockchain technology, traditional shares or fund units will be replaced with the issuance of digital tokens to investors. According to the Investment Association, this will remove the presently laborious processes involved in buying and selling mutual funds. 

The Investment Association has also proposed the creation of a task force that will explore other possible uses of blockchain technology. These include using DLT (Digital Ledger Technology) create new products and services and allowing investors to customize their portfolios with holdings in private companies and digital assets.

Additionally, the lobby effort is asking that mutual funds be allowed to hold digital assets in their portfolios. Chris Cummings, the chief executive of the Investment Association, said the regulations are needed to drive 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 financial technology group—to develop live tokenized funds for the U.K. market. 

The FCA could roll out regulations for blockchain-traded funds 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 both banking and non-banking firms that want to offer tokenized securities or Security Token Offerings (STO) as it is termed in the regulations. 

Meanwhile, the SEC approved the U.S.’s first blockchain-traded mutual fund from Franklin Templeton in December 2021 after the company convinced it that the fund does not have 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 up the shores of the country to investors, the government believes. 

The U.K. has stated plans to become more hospitable to digital assets as it hopes to become a global hub for the industry. The U.K. intends to do this by establishing regulations for all aspects of the industry. 

Watch: The BSV Global Blockchain Convention presentation, Fabriik: Powering Markets for BSV, NFTs & Other Digital Assets

https://www.youtube.com/watch?v=RzJsCRb6zt8&t=6866s