The Financial Conduct Authority (FCA), the regulatory body overseeing the financial sector in the UK, is close to completing a blueprint for fund tokenization. The FCA has been collaborating with the Technology Working Group to develop this blueprint, which aims to leverage distributed ledger technology (DLT) for fully digitized funds.
Collaboration with Technology Working Group
FCA Chair Ashley Alder revealed in a recent speech that the FCA has been working with the Technology Working Group, which sits under the Treasury’s Asset Management Taskforce to create a blueprint for fund tokenization. “We’ve been working with the Technology Working Group, which sits under the Treasury’s Asset Management Taskforce, on a blueprint for fund tokenisation,” he said.
Enhancing Asset Management Regime
Earlier this year, the FCA published a discussion paper that explored the potential adoption of DLT by fund managers to offer digitized funds to the public. This paper focused on enhancing the asset management regime in the country. Alder highlighted the ongoing engagement between the FCA and firms and trade associations regarding proposals for fund tokenization, signaling the regulator’s commitment to gathering input and considering necessary rule changes.
Fund tokenization involves the issuance of digital tokens that represent ownership interests in a fund, utilizing DLT for transparency and efficiency. By leveraging this technology, the FCA aims to streamline the process of managing and investing in funds, providing enhanced accessibility and liquidity for investors.
“We’ve been working with the Technology Working Group, which sits under the Treasury’s Asset Management Taskforce, on a blueprint for fund tokenisation.” – Ashley Alder
New Rules for Digital Assets
Last week, the FCA implemented new rules pertaining to digital assets which require crypto firms to register with the financial regulator and have their marketing materials approved by an FCA-authorized firm. Key updates include exchanges providing clear warnings to customers about the risks associated with crypto investments, fair and transparent marketing materials, and a 24-hour cooling-off period for new customers.
While the FCA extended the deadline for implementing technically challenging features like the cooling-off period until January 2024, firms are expected to adhere to the “core rules” from October 8. Major crypto exchanges Coinbase, Revolut, and Binance have already updated their mobile and web applications to comply with the new regulations.
Coinbase and Revolut informed their customers via email about the changes, which included the addition of “risk disclaimers” for crypto transactions. Users were also requested to update their mobile applications accordingly. Binance launched a dedicated webpage specifically for its UK customers and temporarily halted operations through its mobile app but later resumed, assuring its British users of compliance with the new regulations.
