UK Government Embraces Fund Tokenisation Blueprint as Catalyst for Asset Management Sector Innovation

In a significant move towards fostering innovation in the asset management sector, the Economic Secretary to the Treasury’s Asset Management Taskforce, following its re-establishment in April 2023, has unveiled a Technology Working Group. Chaired by Michelle Scrimgeour, CEO of Legal and General Investment Management (LGIM), the group comprises industry experts collaborating closely with the Financial Conduct Authority (FCA) and HM Treasury.

The primary focus of the Technology Working Group’s initial phase has been the creation of a blueprint for implementing fund tokenisation in the UK. This innovative publication, titled “UK Fund Tokenisation – A Blueprint for Implementation,” showcases the revolutionary potential of tokenisation technology in propelling the asset management sector forward.

Tokenisation involves the issuance of units recorded on a distributed ledger, offering a departure from traditional systems of record-keeping. Transitioning the operational infrastructure of investment funds to a distributed ledger is expected to enhance efficiency, transparency, and competitiveness within the sector.

Notable members of the Technology Working Group include the Investment Association (IA), LGIM, HM Treasury (HMT), FCA, EY, Legal & General Investment Management, Fidelity International, Baillie Gifford, BlackRock, JP Morgan Asset Management, M&G, Schroders, Archax, Aquis Exchange, Augmentum, Calastone, CMS, Copperco, Galaxy Digital, Hargreaves Lansdown, Innovate Finance, London Stock Exchange Group, NEST, and Northern Trust.

The UK government warmly welcomes the publication, emphasizing its potential to advance the broader conversation on the role of technology in asset management. The move signifies the UK’s readiness to embrace innovation and sets the stage for exciting new business opportunities in the future.

FCA Welcomes Industry Report on Fund Tokenisation Models

The Financial Conduct Authority (FCA) has expressed its welcome for the Technology Working Group’s report on fund tokenisation models. The report, which outlines how firms can develop such models within the existing legal and regulatory framework, has been eagerly anticipated.

The FCA, alongside HM Treasury, serves as an observer on the industry-led Technology Working Group, reporting to the government’s Asset Management Taskforce. The report signals growing industry interest in fund tokenisation, recognizing its potential benefits. However, the report also acknowledges the presence of commercial, legal, and technological challenges that may impede widespread use, both in the UK and globally.

This collaborative effort between industry leaders, regulators, and government entities reflects a commitment to navigating and overcoming challenges to unlock the transformative potential of fund tokenisation in the asset management sector.

Read the full report below

Photo by alexandru vicol on Unsplash

Read other stories: Osaka Digital Exchange to Pioneer Digital Securities Trading in Japan

Societe Generale-FORGE Unveils Pioneering Report on Carbon Footprint of Security Tokens