The Financial Conduct Authority (FCA) of the United Kingdom has laid out a detailed plan aimed at guiding asset managers in integrating blockchain technologies for the tokenization of funds. This announcement was made on a recent Tuesday.

The FCA’s initiative is designed to enhance clarity for firms seeking to adopt tokenization, which is anticipated to spur innovation and growth within the asset management sector.

“Tokenization promises significant transformations in asset management, benefiting both the industry and consumers,” remarked Simon Walls, the FCA’s Executive Director of Markets. “Firms have many tools available under current regulations, and further possibilities will open with the proposed changes.”

This new approach is expected to foster competition, lower expenses, and expand investment opportunities, especially in private markets and infrastructure. By digitizing their operations, asset managers could also decrease the costs associated with reconciliation and data sharing.

FCA’s Roadmap for Tokenized Funds

The roadmap includes guidance for operating tokenized fund registers using the existing framework through the UK Blueprint model, a streamlined approach for processing both traditional and tokenized fund units, and a plan for blockchain-based settlement.

The FCA aims to assess how regulations might adapt as tokenization gains traction. Walls emphasized the UK’s potential to become a leader in this field, stressing the need to provide asset managers with the assurance necessary for implementation.

Recently, Coinbase called upon its users to back a public petition urging the UK to adopt an innovation-friendly strategy for blockchain and stablecoins. This petition seeks a comprehensive framework that encompasses regulations for stablecoins and tokenization, alongside the promotion of blockchain usage and the designation of a blockchain leader.

Petition for blockchain innovation Petition for blockchain innovation. Source: UK Parliament

UK Criticism Over Crypto Policy

The regulatory stance of the UK concerning cryptocurrencies has faced scrutiny from key industry players. In June, a report by the Independent think tank, OMFIF, claimed that the UK has wasted its initial advantages in distributed ledger technology.

In response, the FCA recently reversed its ban on crypto exchange-traded notes for retail investors, allowing them to now trade on FCA-approved UK exchanges. Additionally, the Bank of England is reportedly relaxing its restrictions on corporate stablecoin holdings, contemplating exemptions for firms needing larger fiat-backed reserves.