UK FCA Nearing Completion of Fund Tokenization Framework for Release This Year

In recent months, the Financial Conduct Authority (FCA), the regulatory body overseeing financial activities in the U.K., has openly communicated about its ongoing dialogues with companies and industry associations concerning potential strategies for fund tokenization.

According to Ashley Alder, Chair of the FCA, the organization has joined forces with the Technology Working Group to formulate an all-encompassing plan for fund tokenization. This endeavor is in line with the FCA's overarching goal of modernizing and refining the regulatory framework for asset management in the U.K. This objective was laid out in detail in their discussion paper that was made public in February. The paper delved specifically into the potential integration of distributed ledger technology by fund managers to enable the offering of fully digitalized funds to the public.

Fund tokenization involves the issuance of digital tokens that represent ownership shares in a fund, employing distributed ledger technology.

In their aforementioned discussion paper, the FCA made it explicit that they were actively seeking input from companies and industry associations regarding proposals for fund tokenization. Their intention is to fine-tune their approach and consider potential adjustments to regulations.

Alder provided further insight, stating:

 "We have been collaborating with the Technology Working Group, which operates under the Treasury’s Asset Management Taskforce, to create a blueprint for fund tokenization. The working group intends to release this later in the year."

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