LONDON, Oct 14 (Reuters) – Britain’s financial regulator said on Tuesday it plans to encourage asset managers to “tokenize” their funds on blockchain, in a bid to attract younger investors.
Under the proposals, UK asset managers would be allowed to issue crypto tokens representing shares in their funds, using public blockchains such as Ethereum. Until now, tokenization has been limited to private blockchains.
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BRITAIN SEEKS BIGGER ROLE IN CRYPTO
“Tokenization has the potential to drive fundamental changes to asset management, with benefits for industry and consumers,” Simon Walls, executive director of markets at Britain’s Financial Conduct Authority, said in a statement launching a consultation on the plans.
The Investment Association, an industry body that represents UK asset managers, said allowing public blockchains was “a fairly significant change in position from the FCA” and would lead to more funds using it.
However, public blockchains have technological limitations that “may result in risks to consumer protection, market integrity and stability,” the FCA said, adding that firms must continue to meet their regulatory obligations.
TRADING APPS ATTRACT YOUNG INVESTORS
The FCA also asked for comments on whether stablecoins – crypto assets linked to fiat currency – should be allowed to be used as settlement of funds.
At a press briefing, Nike Trost, interim director of buy-side at the FCA, acknowledged that the benefits could take some time to materialize, as companies improve their technology.
The regulator said it was considering action as technology reshapes consumers’ investment expectations. Nearly half (47%) of trading app users are aged 18 to 34, the FCA said, and these platforms typically sell low-cost investments in shares, or fractions of them, rather than funds.
The FCA added that the possibility of allowing regulated funds to invest directly in cryptocurrencies would be examined in an upcoming review.
($1 = 0.7541 pounds)
Reporting by Phoebe Seers. Additional reporting by Elizabeth Howcroft. Editing by Mark Potter and Louise Heavens
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