UK allows development of tokenized products
UK investment industry body The Investment Association announced on the 24th that government authorities have given permission for licensed UK funds to develop tokenized products. The association is the UK investment management industry body, with 250 member companies managing approximately 166 billion yen (8.8 trillion pounds) in assets.
The Investment Association has also published a report called ‘UK Asset Tokenisation – A Blueprint for Implementation’ in collaboration with the UK Treasury and the Financial Conduct Authority (FCA). It reveals a roadmap for introducing distributed ledger technology (DLT) through fund tokenization.
As a first step, this report outlines a baseline model for tokenization implementation that can be implemented within existing legal and regulatory frameworks and can be quickly adopted by investment management firms.
What is RWA?
Abbreviation for “Real World Asset.” RWA that is tokenized on the blockchain includes real assets such as real estate, artwork, trading cards, and securities such as stocks and bonds.
Virtual currency glossary
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Currently, the tokenization of real-world assets (RWA) is receiving increasing attention from companies and governments around the world. The move shows that the investment industry and government are working together to explore these areas in the UK as well.
In Japan, the Okasan Securities Group announced on the 22nd that it will collaborate with Mizuho Securities and six other companies to issue security token (ST) bonds to commemorate the company’s 100th anniversary.
connection : Okasan Securities Group to issue ST bonds to commemorate 100th anniversary of founding, Mizuho Securities and 6 other companies collaborate
Advantages of fund tokenization
Earlier this year, the UK government established a new technology working group within its wealth management taskforce. Michel Scrimgeour, the chair of this working group, explains the significance of asset tokenization as follows:
Tokenization of funds has huge potential to revolutionize the way the industry operates by increasing efficiency and liquidity, enhancing risk management, and making it easier to create bespoke portfolios.
Partnership and collaboration between the investment management industry, the Financial Conduct Authority (FCA) and the Treasury is creating momentum for change. These things are essential to achieving the innovation we need.
It is vital that the UK remains at the forefront of technological development.
Sarah Pritchard, FCA’s executive director of markets, said she was looking forward to continuing to work closely with the industry.
First stage of tokenization
The report also describes the first phase as introducing distributed ledger technology (DLT) in the registry and transaction functions.
Its characteristics are that it is approved by the FCA and falls within the scope of laws and regulations in line with existing industry norms, and that it tokenizes mainstream investment assets such as stocks and bonds, but does not hold crypto assets (virtual currency) etc. They say they won’t.
It also went on to say that the funds settlement will be done completely off-chain and no digital money will be used in the process.
The working group plans to further explore the second stage by around February 2024. It is expected that the model established in the first stage will be further developed in various ways.
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