On 4 November 2024, the Financial Conduct Authority welcomed the inaugural report on tokenisation in the asset management sector from Project Guardian, an international collaboration spearheaded by the Monetary Authority of Singapore. This report, developed through Project Guardian’s asset and wealth management workstream, outlines an ambitious roadmap for the implementation of distributed ledger technology within asset management, aiming to facilitate more efficient, transparent, and accessible investment solutions for firms and investors alike.
The announcement from the Financial Conduct Authority highlights the significance of the report in setting the foundation for an industry-wide shift towards the use of distributed ledger technology and tokenisation. As part of this initiative, the Financial Conduct Authority is committed to collaborating with Project Guardian members in exploring regulatory considerations around tokenisation in asset management. This work will examine potential regulatory and supervisory principles that can support safe tokenisation practices, as well as assess any barriers that might impede the adoption of tokenisation within the asset management sector.
The Guardian Funds Framework outlined in the report sets a phased approach for implementing distributed ledger technology across the fund lifecycle, from origination and issuance to secondary market trading and custody. This framework reflects Project Guardian’s focus on advancing regulatory technology and developing standards that will enable the scalability of tokenisation use cases across asset management. According to the report, tokenisation can significantly enhance transparency and accessibility, streamline operations, and reduce costs, creating a more investor-focused and flexible asset management industry. The Financial Conduct Authority’s support of this vision demonstrates its commitment to nurturing an innovative financial sector that can safely integrate digital advancements.
In 2025, the Financial Conduct Authority will work closely with the Monetary Authority of Singapore to explore regulatory adaptations necessary for integrating tokenised assets within the existing regulatory landscape. This collaboration aims to identify principles that can enhance consumer protection and market integrity within tokenised environments while mitigating any potential regulatory barriers that may hinder the continued growth and adoption of tokenisation.
Project Guardian was established to create a globally aligned approach for exploring the potential of tokenisation in asset and wealth management. The Guardian Funds Framework, an initiative within Project Guardian, serves as a non-prescriptive guideline and best practice document for implementing tokenisation in asset management (Guardian-Funds-Framework). The framework aims to address various operational and technical challenges associated with tokenisation, such as risk management, standardisation of asset servicing, and regulatory compliance.
The Financial Conduct Authority, as part of Project Guardian’s policymaker group, has been actively involved in working with firms from the United Kingdom, Singapore, and other international regions to develop tokenisation use cases, including participation in events like the Point Zero Forum in Zurich. This collaboration has allowed the Financial Conduct Authority to observe and contribute to early developments in tokenisation, supporting its regulatory and industry insights as tokenisation projects progress globally.
To support the evolution of tokenisation, the Financial Conduct Authority and Project Guardian stress the importance of establishing industry standards for digital assets and distributed ledger technologies. The Guardian Funds Framework report provides an industry vision for distributed ledger technology, describing tokenisation’s potential to simplify asset ownership and increase asset liquidity. It also discusses how tokenisation can introduce composable and modular structures that cater to investor-specific needs, ultimately aiming to transform the asset management industry from a product-centric to a client-centric model.
The Financial Conduct Authority and the Treasury are acting as observers on the Technology Working Group of the United Kingdom’s Asset Management Taskforce, which is examining the feasibility and potential benefits of fund tokenisation for the United Kingdom market.
(Source: https://www.mas.gov.sg/-/media/mas-media-library/development/fintech/guardian/guardian-funds-framework.pdf, https://www.fca.org.uk/news/statements/fca-welcomes-project-guardian-report-tokenisation)
