The Financial Conduct Authority has released plans to support tokenisation in asset management. According to the regulator, the initiative aims to promote innovation and efficiency across the sector, including new guidance to help firms adopt digital technology with greater clarity.
Tokenisation Benefits Professionals More Than Retail
Retail investors could indirectly benefit. Tokenisation may lower costs, improve fund operations, and expand access to investment products, allowing smaller investors to participate in diversified or private funds once limited to institutions.
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Matthew Smith of EC Markets sees tokenisation as valuable but likely more relevant to funds and professional investors than retail. Most retail clients may lack the time or expertise to assess tokenised securities, and broader awareness and educational materials will be needed.
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Tokenisation Could Lower Costs, Expand Access
The UK hosts about 2,600 asset management firms overseeing £14 trillion in assets for domestic and global clients. The FCA said it wants to help the sector adapt as investment practices evolve. Tokenisation, which represents assets digitally on distributed ledger technology, may help asset managers remain competitive.
According to the regulator, tokenised products could increase competition, broaden distribution, and make investing more accessible. The approach may also help reduce fund management costs by improving data sharing and reconciliation between firms.
Framework Prepared for Tokenised Funds
Simon Walls, Executive Director of Markets at the FCA, said tokenisation could bring “fundamental change” to the industry. He added that existing rules already allow many of these developments and that the FCA is ready to collaborate on the next stage.
The proposals include guidance for operating tokenised fund registers under the current framework, a simplified model for buying and selling fund units, and a roadmap to address barriers such as blockchain settlement. The paper also explores how tokenisation models could develop and how regulation might progress.