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Regulation and Collaboration are the Two Main Factors Hindering Tokenised Asset Issuance

A new study from the Investment Association and financial software specialist Bravura, has revealed that asset managers are very keen for the inclusion of tokenised assets. However, there are limiting factors stopping widespread adoption.

Over half of respondents plan to hold some form of tokenised asset within the next one to ten years, according to the report. This comes as no surprise as one in three respondents (29 per cent) state they expect to offer tokenised funds within the next one to five years. This figure is likely to rise following the confirmation last week from the FCA that there are no significant regulatory barriers to adoption in the context of industry’s blueprint model for tokenisation.

In fact, the study found that fund managers with assets under management totalling more than £8.5trillion believe digital assets represent an evolution to the current investments landscape, rather than an all-out digital revolution.

When looking at the perceived benefits of digital assets compared with conventional investment instruments, respondents believed the biggest boon was improving trading. This was in addition to settlement and liquidity, followed by lowering costs. Other benefits include making the process simpler for everyone and providing greater flexibility to create financial products.

The survey was conducted before the blueprint’s publication. The results show that a lack of effective industry collaboration is, slowing down innovation and uptake. In fact, the overwhelming majority (85 per cent) of respondents believe this to be the biggest barrier to wider adoption. This is followed by a lack of effective regulation (79 per cent). Wider uncertainty and prioritising other projects (50 per cent) is also a major concern.

Importance of collaboration

John Allan, head of innovation and operations unit, the Investment Association, said: “The potential of digital assets and its associated technology holds significant implications for investment firms. The recent work on fund tokenisation via the Asset Management Taskforce exemplifies the successful collaboration between the industry, the broader funds ecosystem, and the UK authorities.

“This serves as a model for collaboration in broader areas, such as the utilisation of digital assets and digital forms of money in investment portfolios. We are already collaborating with the sell-side to ensure that the UK maintains its competitiveness in this rapidly evolving field.”

Ian Hutchinson, head of growth EMEA, Bravura, said: “It’s clear from the survey that whilst UK fund managers believe digital assets will be a significant investment class, they will co-exist with other types of conventional investments in the future. This is very much an evolution towards a new, more efficient way of investing and it’s reassuring to see some activity in this area from the largest fund managers in the UK.

“With regulation catching up with innovation following the Asset Management Taskforce’s recently published implementation blueprint, I imagine we’ll only start to see more interest in this potentially groundbreaking technology for funds administration.”

Author

  • Francis is a journalist and our lead LatAm correspondent, with a BA in Classical Civilization, he has a specialist interest in North and South America.

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