IA calls on government to create blockchain traded funds

According to the IA, the landscape it envisages for funds of the future would offer consumers ‘more engagement and customisation, while maintaining important consumer protections’

The UK’s asset management industry is calling on the government to create a new class of fund that incorporates blockchain technology, the digital process that underpins much of the cryptocurrency industry.

The Investment Association (IA), the trade body representing the UK’s investment management firms running nearly £10 trillion ($11.98 trillion) worldwide, has urged the government and the City regulator, the Financial Conduct Authority (FCA), to work together ‘at pace’ to approve blockchain-traded funds that would issue digital tokens to investors in place of traditional shares or fund units.

The IA says that the increasing adoption of so-called ‘tokenisation’ would ultimately reduce costs for consumers and improve efficiency in the delivery of funds, through quicker settlement and improved transparency of transactions.

It added that tokenisation may also broaden the assets held within a fund by increasing access to private markets and illiquid assets such as property, that cannot quickly or easily be converted into cash.

According to the IA, the landscape it envisages for funds of the future would offer consumers ‘more engagement and customisation, while maintaining important consumer protections’.

It added that this could include the provision of a greater variety of portfolios tailored to the specific needs of individual investors and a wider range of financial advice services to address the UK’s current advice gap.

Earlier this year, the Treasury, headed by Rishi Sunak MP, former Chancellor of the Exchequer, announced a series of measures designed to elevate the UK into a global hub for cryptoasset technology and investment.

The FCA issues regular warnings to consumers about the crypto industry, reminding them that cryptoassets are unregulated and high-risk.

The regulator’s current stance on crypto as an investment is that investors ‘are very unlikely to have any protection if things go wrong, so people should be prepared to lose all their money if they choose to invest in them’.

Chris Cummings, IA chief executive, said: With the ever-quickening pace of technological change, the investment management industry, regulator and policymakers must work together to drive forward innovation without delay.

He said: Greater innovation will not only boost the overall competitiveness of the UK funds industry, but will improve the cost, efficiency and quality of the investment experience.