UK Government Greenlights Tokenization Initiative for Investment Funds

On November 24, the UK officially approved a proposal paving the way for authorized funds to utilize tokenization in the investment sector. This move is expected to enhance efficiency, transparency, and competitiveness in the industry. The initiative is a collaborative effort led by the Government Asset Management Targeted Working Group, working in conjunction with the Financial Conduct Authority (FCA), Her Majesty’s Treasury, and major investment firms like BlackRock.

The group published a comprehensive report titled “Tokenization of UK Funds: Implementation Plan,” outlining a detailed roadmap for the implementation of fund tokenization with support for Distributed Ledger Technology (DLT). According to the report, FCA-authorized funds can initially use tokenization for sale and redemption transactions, ensuring compliance with existing legal and regulatory frameworks. This includes maintaining traditional assessment and settlement processes and limiting investment portfolios to core assets.

The government will collaborate to help funds integrate tokenization into existing structures, providing them with the capability to use DLT for transactions such as sales and redemptions, as well as maintaining registries of holders. Funds eligible for tokenization must meet specific criteria, including ownership of core assets and adherence to traditional valuation schedules and settlement terms. The project outlines further stages of tokenization, potentially requiring adjustments to legislative or regulatory frameworks.

Positioning itself as a global center for cryptocurrencies and blockchain technology is a crucial political goal for the current UK government. The approval of this proposal signifies its commitment to stimulating innovation and establishing a robust regulatory framework for cryptocurrencies.