UK government's Treasury is gathering a team to delve into the potential of digital tokenization - according to a media release
The United Kingdom is making significant strides in creating a supportive environment for tokenized funds, with active participation from regulatory bodies and industry groups.
The Financial Conduct Authority (FCA) has taken a technology-neutral approach to tokenized fund units, treating them as "security tokens" under existing UK financial markets regulation. This means traditional regulatory regimes and anti-money laundering laws apply to these tokens, ensuring a secure and transparent ecosystem[1].
Last year, the UK's Investment Association (IA) called for a framework for tokenized funds, and the FCA responded by launching a discussion paper in March to improve asset management[2]. The paper included a question about whether fund tokenization was considered a high priority.
The UK's Asset Management Taskforce, particularly through the IA, has developed a blueprint for fund tokenization. This blueprint digitizes key administrative elements of investment funds and represents them as tokens on blockchain ledgers. The FCA is expected to consult on guidance supporting this blueprint model, with results likely available around Q3 2025, indicating a formal step toward regulatory clarity and adoption[3].
Technology working groups, including collaborations like the integration of Stellar blockchain into UK-regulated platforms such as Archax, are playing a crucial role in operationalizing tokenization. These groups focus on building practical tokenization tools and launching tokenized funds, such as the Aberdeen tokenized money market fund[5].
Notable industry players are also embracing digital assets and distributed ledger technology (DLT). Asset manager Abrdn invested in digital asset exchange Archax, and has also joined the governing council of the Hedera public DLT. International asset managers like BlackRock, Apollo, and Hamilton Lane have taken their first steps in the DLT sector[6].
Industry leaders are also expected to attend the meeting of the Asset Management Taskforce, including Michelle Scrimgeour, the CEO of Legal & General Investment Management, Anne Richards, CEO of Fidelity International, Peter Harrison CEO at Schroders, and Patrick Thomson, CEO of JP Morgan Asset Management[4].
Carlyle-owned fund distribution platform Calastone adopted DLT in the asset management sector in 2019, while TISA, a trade association, launched blockchain-based TURN for MiFID cost reporting to clients[7]. These initiatives demonstrate the growing adoption of DLT in the UK asset management sector.
In summary, the UK is advancing a comprehensive framework for tokenized funds involving regulatory consultation by the FCA, industry-led blueprint models by the IA, and active technology implementations through working groups and partnerships with blockchain networks. This integrated approach aims to enhance operational efficiency, regulatory oversight, and broader market access in the UK asset management sector[1][3][5].
[1] FCA (2021). Cryptoassets: A regulatory approach. [Online] Available at: https://www.fca.org.uk/publications/policy/ps21-15 [2] FCA (2022). Discussion paper: Asset management market studies. [Online] Available at: https://www.fca.org.uk/publications/discussion-papers/dp22-03 [3] IA (2021). A blueprint for fund tokenization. [Online] Available at: https://www.theia.org/-/media/files/publications/2021/09/ia-a-blueprint-for-fund-tokenisation.ashx [4] Unnamed source (2022). Exclusive: UK's asset management taskforce to be reconvened by Economic Secretary to the Treasury, Andrew Griffith. [Online] Available at: https://www.financialreporter.co.uk/exclusive-uks-asset-management-taskforce-to-be-reconvened-by-economic-secretary-to-the-treasury-andrew-griffith/ [5] Stellar Development Foundation (2022). Stellar for asset management. [Online] Available at: https://www.stellar.org/assets/expertise/asset-management [6] Abrdn (2021). Abrdn invests in Archax. [Online] Available at: https://www.abrdn.com/media-centre/news/2021/abrdn-invests-in-archax/ [7] TISA (2020). TISA launches blockchain-based TURN for MiFID cost reporting to clients. [Online] Available at: https://www.tisa.co.uk/news/tisa-launches-blockchain-based-turn-for-mifid-cost-reporting-to-clients/
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