The British regulator opened a public discussion about the tokenization of assets

The UK Financial Conduct Authority (FCA) has published a discussion paper on ways that can improve asset management, one of which is tokenization.

The regulator noted that digital tokens and blockchain can be used to entitlement to participation in funds. The FCA believes that the main advantage of tokenization will be the simplification of the procedure for acquiring shares in funds. The immutability of fund records in distributed registries will eliminate the need to create an additional register of shareholder. Tokenization will also eliminate the need to involve third parties, which only complicate the process with additional fees, the FCA noted.

“Tokenization can improve the efficiency of fund management by saving costs, increasing the speed of transactions and eliminating potential administrative errors,” the FCA document states.

At the same time, the department pointed out the problems that may arise with tokenized asset management. First of all, these are strict rules, according to which companies may be prohibited from using a distributed ledger, as well as the risk of a security breach.

The FCA suggested that in the long term, as the blockchain is deeply implemented in the wholesale market, tokenization can also be beneficial for retail investors, who can thus directly own shares of the funds. The regulator called on all interested parties to send comments, feedback and proposals on the document by May 22.

Earlier, the management of Citibank stated that the tokenization of assets will be the future of the financial and payments industry. A few years ago, Circle CEO Jeremy Allaire also said that it would increase the liquidity of corporate securities and other assets without systemic risks.