British Investment Managers Gain Approval for Tokenized Funds

British investment managers have gained approval to establish tokenized funds, signaling a significant move toward integrating blockchain technology within mainstream asset management. The country’s trade body granted approval on Friday, permitting the division of funds into smaller digital tokens supported by blockchain tech.

Under the announcement made by the Investment Association, funds authorized by the UK’s Financial Conduct Authority (FCA) can initiate the creation of tokenized funds. However, these funds are mandated to invest in mainstream assets while retaining their valuation and settlement procedures unchanged.

Michelle Scrimgeour, CEO of Legal & General Investment Management, expressed excitement about the potential impact of fund tokenization on the industry. She stated, “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”.

This influential working group, comprising key players like BlackRock (BLK.N), M&G (MNG.L), and Schroders (SDR.L), aims to leverage blockchain benefits, typically associated with cryptocurrencies, to elevate the asset management domain. This initiative aligns with Britain’s broader post-Brexit strategy, focusing on revitalizing the asset management sector through innovative technologies to boost liquidity and competitiveness.

Tokenized funds are experiencing a surge globally, with the United States, Europe, and Asia already making significant progress. According to a recent report by Calastone, a global funds network, Asia and the United States lead in this domain. Around 39% of U.S. firms and 38% in Asia are actively engaged in fund tokenization projects, compared to 27% in the UK and Europe.

The future for tokenized funds seems promising, with another survey by Calastone indicating that 67% of U.S. asset managers and 61% in Asia anticipate launching tokenized products within a year. Moreover, 96% of Asian asset managers foresee tokenizing funds within three years, showcasing the global trend toward this innovative investment approach.

As the UK embraces tokenized funds, it becomes part of a global movement reshaping the asset management landscape, blending traditional finance with blockchain advancements for a more efficient and inclusive market.