This week, the UK Financial Conduct Authority (FCA) issued a statement on tokenization or turning investible assets into digital assets.
Digital securities have long been recognized as the future of markets. Today, with the advent of global regulatory changes supporting digital transformation, broader acceptance of tokenized assets is quickly moving toward mass adoption.
Simon Walls, Executive Director of Markets at the FCA, says tokenization has the potential to generate fundamental change, benefiting both consumers and the financial services industry.
“There are many things that firms can do under our existing rules and more that become possible with the changes we propose enacting now. We stand ready to design the next stage with the industry – this publication suggests a path. The UK has the opportunity to be a world-leader here and we want to provide asset managers with the clarity and confidence they need to deliver.”
The FCA is proposing guidance on tokenized funds, an alternative model for fund managers to enable the buying and selling of these digital assets, a roadmap for future developments using blockchain, and engagement on how tokenized models may evolve. Tokenized assets can save time and money for both intermediaries and customers.
Last January, the FCA sent a letter to PM Keir Starmer on its plans to advance the UK’s competitiveness and growth regarding markets. The letter said that digital securities adoption would start with asset management. “As other countries pull ahead, we need a UK financial services digital infrastructure plan …” stated the FCA.
Today, the FCA has posted proposed new rules for fund tokenization as part of a consultation asking interested parties to share their viewpoints on how these digital assets should evolve and be integrated into the marketplace.
The FCA is utilizing a “Blueprint” on fund tokenization published by the Investment Association in 2023 as part of the proposal.
The tokenization consultation states that “Innovation is a core contributor to economic growth, and ensuring our financial services remain fit for the future.”
“The UK is a leading investment management centre with £ 14.3 trillion assets under management. Asset managers play an important role in the economy, supporting the financial well-being of millions of people.”
Tokenization can streamline value transfer and management of assets. It can also enhance security while fostering a new era of novel asset access for all.
The founder and CEO of Tokenovate, Richard Baker, lauded the FCA’s move to embrace digital assets and tokenization.
“The FCA’s plans to support fund tokenisation are a welcome step towards aligning regulation with technological progress across the investment industry. Providing clarity on how tokenised funds can operate within existing frameworks will give firms the confidence to adopt standards-based solutions, such as those enabled by the Common Domain Model, to improve efficiency and transparency. The real opportunity lies in how distributed ledger technology can enhance fund operations, from automated post-trade processes to tokenised settlement, delivering tangible gains in accuracy, speed, and control. As global competition grows, these proposals strengthen the UK’s position as a leading centre for financial innovation.”
Eventually, all investable assets will become digital. Tokenization will become the norm. If the UK is serious about bolstering its status as a top international financial centre, policymakers and industry participants must move quickly to lead the way, rather than chasing after other jurisdictions, as the transformation to digital assets picks up speed.
The consultation is accepting feedback until November 21 (chapters 2-4) and December 12, 2025 (Chapter 5).