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UK Greenlights Tokenization Investments as $11 Trillion Group Plans Fund

An $11 trillion investment group in the UK is backing tokenization

Photo by Simon Hurry / Unsplash

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The United Kingdom can't get enough of tokenization. Demonstrating its appetite for leveraging blockchain technology, the UK has been approving investment funds venturing into tokenization.

A new report by the Investment Association (IA) reveals plans for the group with $11 trillion in AUM to implement tokenization as part of its roadmap.

"Ultimately, tokenized funds aim to provide a way to interact with increasingly digitized capital markets, where traditional and potentially new types of asset classes are issued and traded using DLT (distributed ledger technology)," the report states.

In a statement, IA said, "Marking a step change in investment fund innovation, fund tokenisation has the potential to improve operational efficiency, transparency, and international competitiveness in the sector."

The news comes as the UK government is set to pass legislation to implement the Digital Securities Sandbox (DSS), a pioneering initiative aimed at bolstering the nation's digital assets sector. The DSS was part of Chancellor Jeremy Hunt's comprehensive strategy to enhance the UK economy, encompassing 110 measures.

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The Investment Association's initial stage was presented in collaboration with BlackRock, the UK Treasury and the Financial Conduct Authority as part of the Technology Working Group of the Government's Asset Management Taskforce roadmap.

In the report, IA outlines a model for tokenization that operates within existing legal and regulatory frameworks, allowing for FCA-authorized funds to adopt tokenization.

“Fund tokenization has great potential to revolutionize how our industry operates, by enabling greater efficiency and liquidity, enhanced risk management and the creation of more bespoke portfolios,” Michelle Scrimgeour, chair of the Working Group and CEO at Legal & General Investment Management, said. “It is vital the UK remains at the forefront of technological development.”

“We welcome the report today which identifies a way forward for tokenization and has concluded that there are no significant regulatory barriers to the adoption of the proposed baseline model,” Sarah Pritchard, FCA's executive director, markets, and executive director, international, added.

Singapore's Project Guardian is a similar initiative that is designed to help fund managers tokenize real-world assets on the blockchain.

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In a "Mega Update," rolled out by MAS at the Singapore Fintech Festival earlier this month, five more pilots were added to Project Guardian to test promising asset tokenisation use cases. "This potentially paves the way for integration across the capital markets value chain including listing, distribution, trading, settlement, and asset servicing," MAS said.