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UK FCA’s Blueprint for Fund Tokenization Nearing Completion

The UK’s regulatory agency, the Financial Conduct Authority (FCA), is nearing the final stages of drafting a framework for fund tokenization.

In a recent address, Ashley Alder, the Chair of the FCA, disclosed the agency’s partnership with the Technology Working Group to create this plan. The objective is to harness distributed ledger technology (DLT) to facilitate entirely digital funds.

Alder stated, “In collaboration with the Technology Working Group, under the aegis of the Treasury’s Asset Management Taskforce, we are devising a blueprint for fund tokenisation.” He added that the working group is set to release this blueprint later this year.

In February, the FCA released a discussion paper centered on bolstering the asset management framework in the UK.

The document delved into the prospective embrace of DLT by fund managers as a means to present digital funds to the populace.

Alder underscored the sustained dialogue between the FCA, various enterprises, and trade associations about proposals concerning fund tokenization. This ongoing conversation indicates the regulator’s dedication to obtaining feedback and pondering potential regulatory modifications.

Tokenizing funds means issuing digital tokens which symbolize an ownership stake in a particular fund, leveraging Distributed Ledger Technology (DLT) for clarity and effectiveness.

Through this innovation, the intention is to simplify the fund management and investment procedures, offering improved ease of access and liquidity for stakeholders.

“Numerous companies recognize the potential applications for Distributed Ledger Technology (DLT), even if the direct promotion of these tokens might be in the distant future. In light of this, we’ve conducted a technology sprint with industry professionals to evaluate policy adjustments and regulatory modifications necessary to facilitate fund tokenization.”

UK’s New Crypto Regulations Come into Effect

Recently, the FCA rolled out fresh regulations concerning digital assets. Now, crypto businesses are mandated to register with the financial oversight body and get their promotional content vetted by an entity authorized by the FCA.

Central to these changes is the obligation for exchanges to offer unambiguous advisories to their clientele about the potential dangers of crypto investments.

All promotional content should uphold principles of fairness, clarity, and honesty. Moreover, there’s a mandatory 24-hour waiting period for newcomers.

Although the FCA has pushed back the deadline to January 2024 for the implementation of more technically demanding features like the waiting period, businesses are anticipated to comply with the fundamental regulations starting October 8.

Recent reports indicate that prominent crypto exchanges like Coinbase, Revolut, and Binance have revamped their web and mobile platforms to align with the latest regulations.

Coinbase and Revolut reached out to their clientele via email, highlighting the new modifications, particularly the inclusion of “risk disclaimers” for cryptocurrency transactions. They also prompted users to update their respective apps to the latest versions.

Binance took a different approach by introducing a unique webpage tailored for its UK-based users.

Following a brief suspension of its mobile app activities, Binance resumed services, reassuring its UK customers of their adherence to the newly instated regulations.

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I want to save money. Will cryptocurrency work?

Cryptocurrency is essentially virtual money that operates in a decentralized manner, not through a bank but directly on multiple independent computers.

Every cryptocurrency has two main components: the units of digital exchange called “coins” and the network within which the exchange takes place. These units can be transferred between wallets and exchanged on exchanges. The networks in which these coins exist are called blockchains, which translates to “chains of blocks.”

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