The UK authorities have approved UK Investment funds to employ blockchain technology for tokenisation. This action could become a game-changer for the asset management sector.
Tokenisation involves the production of digital tokens that signify ownership of base assets like shares, bonds, or real estate. The token issuance, transfer, and redemption will occur through distributed ledger technology. It is not only secure, but its transparency makes transaction recording and verification straightforward.
A group of tech experts from the Government’s Asset Management Team was set up earlier this year. Its mission is to look into the role of cutting-edge technology in the UK’s asset management industry. It has officially presented its plan for incorporating DLT in its report, “UK Fund Tokenisation – A Blueprint for Implementation.”
The report highlights the advantages of fund tokenization. It mentions how it enhances efficiency, promotes transparency, and provides a competitive advantage in the marketplace. It also proposes a common structure for tokenisation, which perfectly aligns with prevailing laws and guidelines. However, investment firms can start using it right now.
The Financial Conduct Authority (FCA) allows UK funds to create and trade tokens as long as they follow specified rules. These involve having a regular investment portfolio and giving assessments and completion within standard procedures and timelines.
It implies that tokenized funds would be very alike and in line with traditional funds that are available today, all while utilizing DLT for buying and selling transactions and serving as the record of investors.
The report also sets out future steps for improving and innovating fund tokenization. It includes making portfolios more complex and personalized, working with other DLT systems and services, and supporting international distribution and connectivity.
Michelle Scrimgeour, the Working Group head and Chief of Legal & General Investment Management, announced.
“The partnership and collaboration between the investment management industry, the FCA and HM Treasury has created strong momentum for change, which is essential to deliver the innovation we need. It is vital the UK remains at the forefront of technological development. In my role as Chair, it has been a real pleasure to see the breadth and depth of expertise the UK has to offer in adopting and leveraging the technology that we believe will underpin the next generation of asset management.”
Thus, HM Treasury and FCA have endorsed the growth of fund tokenisation and manifested their support, particularly within the UK.
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