UK regulator backs 'tokenised' funds to attract younger investors

By Phoebe Seers (Reuters) -Britain's financial regulator set out plans on Tuesday to encourage asset managers to "tokenise" their funds on blockchain, in a move aimed at attracting younger investors. Under the proposals being considered, UK asset managers would be able to create crypto tokens representing shares in their funds, using public blockchains like Ethereum. Until now, funds had only been able to use private blockchains. Tokenisation – the process of creating blockchain-based versions of financial assets – has seen a revival of interest this year, helped by rising crypto prices and U.S. President Donald Trump's support for the crypto industry. Proponents say it can improve efficiency and cut the costs of fund management. BRITAIN SEEKING A BIGGER ROLE IN CRYPTO "Tokenisation has the potential to drive fundamental changes in asset management, with benefits for the industry and consumers," Simon Walls, executive director of markets at Britain's Financial Conduct Authority, said in a statement launching a consultation on the plans. The move is the latest sign of Britain's push to promote digital assets. The country's finance ministry last month announced plans to co-operate with the U.S. on crypto. The FCA also sought feedback on whether to allow stablecoins – crypto assets that are pegged to a fiat currency – to be used as settlement for the funds. In a press briefing, Nike Trost, interim director buy-side at the FCA, acknowledged that the benefits could take a while to materialise, as firms take time to upgrade their technology. The watchdog said it was minded to act as technology was driving changes in consumer expectations around investing. Almost half (47%) of the users of trading apps are aged 18-34, the FCA said, and such apps typically sell low-cost investments in shares, or fractions of them, rather than funds. The regulator said the possibility of allowing regulated funds to invest in cryptocurrencies would be considered in a future review. (Reporting by Phoebe Seers. Additional reporting by Elizabeth Howcroft. Editing by Mark Potter)

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