British investment group gets nod to use cryptos, blockchain in this way

Blockchain technology takes center stage in the Investment Association’s approval, promising efficiency, liquidity, and bespoke portfolios.

• The Investment Association views tokenization as a revolutionary force in reshaping industry’s operational landscape.
• Blockchain will take center stage in this paradigm shift

British investment managers have received the green light to venture into the world of tokenized funds, ushering in new avenues of innovation with blockchain. According to a report by Reuters, the nod came from the Investment Association, the industry’s authoritative trade body, on 24 November.

This development opens the concept of tokenization, where assets are divided into smaller tokens supported by blockchain technology. Advocates of tokenization assert that it enhances trading efficiency and transparency. They say it can also offer investors access to a more diverse array of assets. The move is part of Britain’s post-Brexit efforts to fortify liquidity in its asset management sector.

The Financial Conduct Authority (FCA) will pave the way for investment funds under its authorization to explore tokenized offerings.

Investment Association’s approval to innovation in Asset Management

The Investment Association views tokenization as a revolutionary force in reshaping the industry’s operational landscape. It is enthusiastic about the potential of fund tokenization. Tokenization promises improved efficiency, greater liquidity, advanced risk management, and the creation of bespoke investment portfolios.

Michelle Scrimgeour, Chief Executive of Legal & General Investment Management and Chair of the working group steering the initiative, expressed optimism about the transformative impact of this move.

This working group comprises of industry heavyweights such as BlackRock, M&G, and Schroders. It also collaborates closely with the FCA and the UK’s finance ministry. Their collective goal is to unlock opportunities for tokenized funds and drive significant advancements in the financial sector.

Blockchain technology, primarily known for its association with cryptocurrencies, takes center stage in this paradigm shift. The digital ledger, recording ownership of tokens, has predominantly played a role in the cryptocurrency realm, which, despite being a relatively small part of the global financial system, has had a substantial impact.

The global financial community has witnessed tentative steps toward tokenized funds in the United States, Europe, and Asia. Britain’s move adds momentum to this global trend, fostering an environment where investment managers can leverage blockchain technology to innovate and expand the horizons of traditional asset management.

The FCA has also stressed the initiative’s focus on mainstream assets and maintain the existing infrastructure for valuation and settlement. The objective is to strike a balance between fostering innovation and ensuring the stability of the financial system.