The FCA has published guidance on how firms can use distributed ledger technology (DLT) to provide tokenised portfolio management under existing regulations.
New rules will also include an optional Direct to Fund (D2F) model enabling investors to deal directly with the fund, whether traditional or tokenised.
The FCA says tokenisation – which is a way of representing an asset, or ownership of an asset, using DLT – has the potential to lower costs and open up investment opportunities to a wider audience and while improving efficiency for asset managers.
Simon Walls, executive director of markets at the FCA, said: “Tokenisation has the potential to play an important role in asset management, and its adoption will be driven by firms and investors.
“We have focused on delivering what the market has asked for: a clear, practical framework that provides confidence in how fund tokenisation can operate within our rules, both now and into the future.”
John Allan, director, innovation and operations unit and director, Engine at the Investment Association, added:
“Working in collaboration with the investment management industry, the FCA has produced detailed guidance that provides confidence around public‑chain models where the right controls are in place, and the use of digital cash tools for operational needs.
“Alongside wider work on wholesale digital market infrastructure, this guidance and the increased optionality provided by D2F gives firms a stronger foundation to align innovation ambitions with long‑term operating choices.”
The new framework follows a consultation on progressing fund tokenisation, which ran between October and December last year.
Amarjit Singh, EY UK&I digital assets leader, welcomed the FCA’s guidance but warned the government and financial services industry must consider the operational realities.
“Globally, the pace of innovation is accelerating,” she said. “Jurisdictions such as the US and Singapore are moving quickly, and the UK must do the same to maintain competitiveness. Clear regulatory principles are an important step forward.
“However, real market movement requires close collaboration between government and industry to address the operational realities, including accounting, tax, prudential treatment, and control frameworks. These are complex topics, and as the technology itself continues to move at lightening pace, progress will ultimately be defined by how effectively the ecosystem works together to implement fund tokenisation in practice.”
