Asset managers will find it easier to unlock the benefits of fund tokenisation, following the publication of new guidance by the FCA.
The guidance sets out how firms can use distributed ledger technology (DLT) within the regulator’s existing rules.
New rules will also make fund dealing more efficient, including an optional Direct to Fund (D2F) model. This enables investors to deal directly with the fund, whether traditional or tokenised.
Tokenisation is a way of representing an asset, or ownership of an asset, using distributed ledger technology. Tokenisation has the potential to lower costs and open up investment opportunities to a wider audience.
The FCA has worked closely with industry to develop this guidance and rules to support innovation and improve efficiency for asset managers.
Simon Walls, executive director of markets at the FCA said:
'Tokenisation has the potential to play an important role in asset management, and its adoption will be driven by firms and investors. We have focused on delivering what the market has asked for: a clear, practical framework that provides confidence in how fund tokenisation can operate within our rules, both now and into the future.'
John Allan, director, innovation and operations unit and director, Engine at the Investment Association, said:
'This milestone represents a meaningful advance in the UK’s approach to innovating funds market infrastructure. Working in collaboration with the investment management industry, the FCA has produced detailed guidance that provides confidence around public chain models where the right controls are in place, and the use of digital cash tools for operational needs. Alongside wider work on wholesale digital market infrastructure, this guidance and the increased optionality provided by D2F gives firms a stronger foundation to align innovation ambitions with long term operating choices.'
The UK is a leading asset management hub, with around 2,600 firms managing £16.5 trillion of assets for UK and global clients. Supporting growth and innovation in the sector is a core part of the FCA’s strategy[1].
The policy statement also sets out how fund tokenisation could develop over time as part of the FCA’s roadmap for digital assets.
Notes to editors
- Read the Policy Statement: PS26/7: Progressing fund tokenisation[2].
- Read the FCA’s Consultation Paper: CP25/28: Progressing fund tokenisation[3].
- In its letter to the Prime Minister[4], the FCA committed to progress a roadmap for digital assets within asset management to accelerate the adoption of tokenisation and support the growth in the sector.
- Read more on the FCA’s work on fund tokenisation[5].
- The FCA will also be engaging with industry on distributed ledger technology in UK wholesale markets.
- The FCA enables a fair and thriving financial services market for the good of consumers and the economy.
- Find out more about the FCA[6].