The FCA has set out guidance on how fund managers can use distributed ledger technology (DLT) to support innovation in fund tokenisation.
Tokenisation is a way of representing an asset, or ownership of an asset, using DLT. The regulator claims it has the potential to lower costs and open up investing to a wider range of consumers.
The FCA claims that the new rules will also make fund dealing more efficient, including an optional direct to fund (D2F) model, enabling investors to deal directly with the fund whether traditional or tokenised.
The policy statement also sets out how fund tokenisation could develop over time.
Supporting growth an innovation in asset management is a core part of the FCA’s strategy.
John Allan, director, innovation and operations unit and director, Engine at the Investment Association, said: “This milestone represents a meaningful advance in the UK’s approach to innovating funds market infrastructure. Working in collaboration with the investment management industry, the FCA has produced detailed guidance that provides confidence around public chain models where the right controls are in place, and the use of digital cash tools for operational needs.
“Alongside wider work on wholesale digital market infrastructure, this guidance and the increased optionality provided by D2F gives firms a stronger foundation to align innovation ambitions with long term operating choices.”
This guidance is one of many recent changes from the FCA designed to boost the popularity of investing.
This month saw the official launch of the Targeted Support regime, enabling banks, pension providers and other financial firms that are authorised for Targeted Support to provide financial suggestions designed for groups of consumers.
Targeted Support is designed to provide limited financial guidance to groups of consumers with common characteristics. The aim is to increase the availability of financial guidance to more consumers.
The FCA claims it could benefit at least 18m over the next decade.
In February FCA CEO Nikhil Rathi signalled a move away from a strict rules-based approach on regulation to an outcomes-based approach based around the Consumer Duty and supervisory tools.
Mr Rathi said constantly writing new rules was not always the answer to regulatory shortcomings.