PANews reported on November 24 that, according to Ledger Insights, the British Investment Association released an interim report for the technical working group of the Government Asset Management Working Group. This report outlines a blueprint that allows asset managers to engage in fund tokenization in a limited way. The report also provides a roadmap for wider adoption of DLTs, enabling asset managers to reap the full benefits of tokenized funds. The report assumes that the fund invests in traditional assets, using the methodology outlined in Phase 1, and in most cases there will be no UK regulatory issues.

The report also outlines three registries in which DLT may be used: the client registry that records the ultimate beneficiary, the unit registry that lists the major market investors (institutions), and the asset registry. In the first phase of tokenization, asset managers will register to use DLT as units using licensed DLT. However, the biggest benefits claimed by the DLT will be obtained by the other two registries, some of which will require changes to the law.
Technically, tokenized funds are crypto assets, requiring asset managers to register with the FCA for crypto asset anti-money laundering licenses. This is often a slow process, so the FCA is considering how to speed up this process for compliant incumbents. Whether DLT can be used for company registration in the UK is a legal issue and this is something that is being reviewed. Another issue is the need to use a central securities depository (CSD) for listed funds such as EFT. These questions will be explored in the UK's Digital Securities Sandbox. Eager to move fast, investment associations are seeking industry input for Phase 2 and beyond this year.