The UK’s financial watchdog has outlined its support for asset managers planning to launch tokenised funds.

The Financial Conduct Authority (FCA) and HM Treasury have contributed to the second report issued by the Technology Working Group of the UK government’s Asset Management Taskforce.

The first report outlined a regulatory framework for launching tokenised funds while this follow-up report covers further use cases such as funds using digital securities and the collateralisation of money market funds.

Fund tokenisation refers to the representation of assets or securities using blockchain technology. The potential benefits include more efficient processing as well as the ability to fractionalise shares and add liquidity to illiquid asset classes such as property and other real assets.

“Fund tokenisation marks a step change in investment fund innovation and has the potential to revolutionise how our industry operates,” said Michelle Scrimgeour, CEO, Legal & General Investment Management and chair of the technology working group

“This report presents the Group’s second phase of work and is the result of close collaboration across all of our industry, bringing together a broad range of perspectives and expertise.”

“Today’s report highlights the importance of our continued collaboration to realise the opportunities for a more innovative investment management sector in the UK,” added Sarah Pritchard, executive director of markets and international at FCA.

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