The Investment Association, a trade body representing British investment managers, is speeding up the approval of blockchain-traded funds with digital tokens substituting traditional shares by local government and financial regulators.
As the Financial Times reported on Thursday, the trade body is pushing the government to establish a new class of funds employing blockchain technology and create a new task force to examine how distributed ledger technology could accelerate the creation of new products and services.
The reasons behind such a push, according to the Investment Association, are the possible significant cost savings for end investors and the simplification of the existing procedures of buying and selling mutual funds.
Investment Association chief executive Chris Cummings urged boosting the competitiveness of the national financial services:
“Greater innovation will boost the overall competitiveness of the UK funds industry and improve the cost, efficiency and quality of the investment experience.”
According to FT, blockchain-traded funds could become available by the end of the second quarter of 2023 if the Financial Conduct Authority (FCA) gives its regulatory approval. As the newspaper adds, a financial technology group, FundAdminChain, is currently collaborating with the London Stock Exchange and four global asset managers to develop live tokenized funds for the British market.
Brian McNulty, CEO at FundAdminChain, revealed that asset managers have realized the potential to generate market-beating returns via tokenization of funds:
“Tokenised funds can deliver more transparency, instant settlement, improvements in data and analytics, which will contribute to a more efficient system for investors but we need regulatory support to ensure that the UK remains competitive with other jurisdictions.”
The Investment Association also lobbies the FCA to regard the possibility of allowing traditional mutual funds to own cryptocurrencies and other digital assets. But should the FCA get interested in this proposition, it would still require a full consultation to push it through the regulation process.
The first United States-based on-chain mutual fund was launched in April 2021 by Franklin Templeton to process transactions and record share ownership.