UK’s FCA Introduces Plan to Promote Tokenization of Funds on Blockchain

The Financial Conduct Authority (FCA) of the United Kingdom has unveiled a roadmap aimed at assisting asset managers in the integration of blockchain technology for fund tokenization.

In a Tuesday announcement, the authority stated that the initiative is designed to “offer firms greater clarity” for adopting tokenization and to “promote innovation and growth within asset management.”

“Tokenization holds the capability to induce fundamental shifts in asset management, benefitting both the industry and consumers,” noted Simon Walls, executive director of markets at the FCA. “Firms can already undertake numerous actions under our current regulations, with even more options available through the adjustments we propose,” he continued.

The FCA highlighted that tokenized products could foster competition, lower costs, and expand investment opportunities, especially in private markets and infrastructure. Additionally, by digitizing fund operations, asset managers could reduce costs associated with reconciliation and data sharing.

Related: Tokenization requires safeguards, not merely innovation

FCA details plan for tokenized funds

The strategy includes guidance on operating tokenized fund registers under existing regulations via the UK Blueprint model, a streamlined dealing framework for handling both traditional and tokenized fund units, along with a roadmap for blockchain-based settlement.

The FCA also plans to investigate how regulations may need to adapt as tokenization becomes more prevalent. “The UK is poised to become a global leader in this area, and we aim to provide asset managers with the clarity and assurance required for execution,” Walls remarked.

Last month, Coinbase urged its users to support a public petition advocating for the UK to develop an innovation-friendly strategy for blockchain and stablecoins. The petition called for a regulatory framework encompassing stablecoin and tokenization regulations, blockchain adoption, and the designation of a blockchain “czar.”

Related: BNY targets blockchain for real-time tokenized payments

UK receives backlash over crypto regulations

The UK’s stance on crypto regulation has faced backlash from industry figures. In June, analysts from the Official Monetary and Financial Institutions Forum (OMFIF), an independent think tank, cautioned that the UK has wasted its initial advantage in distributed ledger finance.

In July, Coinbase also released a satirical video titled “Everything is Fine,” criticizing the UK’s financial system. The video featured music and lyrics praising the country’s financial strength while illustrating scenes of inflation, poverty, and economic hardship.