The Asset Management Taskforce's Technology Working Group (TWG) has released a report, "UK Fund Tokenisation: a Blueprint for Implementation," detailing the initial phase of integrating innovative technologies into the UK fund management industry.
The report envisions a future where the entire value chain of the asset management industry is managed on distributed ledger technology (DLT) through the tokenisation of investment funds. This approach involves the use of digital money and digital identity methods.
The TWG views this as a strategic opportunity to enhance the UK investment sector's transparency, efficiency and international competitiveness.
The report highlights the potential for synergies across the funds industry, connecting individual investors with investible assets through a secure and decentralised settlement layer.
The TWG has been collaborating with HM Treasury and the Financial Conduct Authority to create a comprehensive blueprint for implementing tokenisation in UK collective investment funds.
The proposed approach is phased, starting with developing a baseline model compatible with existing legal and regulatory frameworks. This model aims to establish an infrastructure for fund tokenisation in the UK collective investments market.
Future stages of this initiative might necessitate changes in regulatory and legislative rules, possibly aligning with broader technological advancements, including the use of digital money.
The TWG is seeking feedback from industry participants to help shape the direction of the second work phase, scheduled to begin in late 2023.
Todd McDonald, co-founder and chief strategy officer at R3, welcomed the new blueprint on fund tokenisation, saying, “Today’s blueprint is a welcome step in setting out how fund managers can innovate with tokenisation safely and securely.” He highlighted the UK's leadership in digital asset innovation, particularly through the digital securities sandbox for industry experimentation.
McDonald also emphasised the importance of evolving technology with robust frameworks, focusing on control location services, custody, and interoperability. He noted, “Interoperability can connect the pieces and enable seamless asset exchange.” McDonald stressed the need for collaboration between public and private sectors to develop a regulatory regime that fosters innovation and standardisation.
