Revolutionizing Finance: In a significant development, British investment managers have received the green light to lead the way in the development of tokenised funds, marking a pivotal moment for the industry. Tokenisation, often referred to as fractionalisation, involves breaking down a fund’s assets into smaller tokens backed by blockchain technology. This innovative approach is expected to bring about transformative changes, offering advantages such as more cost-effective and transparent trading of assets, along with the ability for investors to access a broader array of assets.
The Investment Association, the industry’s trade body, announced that funds authorised by the Financial Conduct Authority (FCA) can now take the initial steps towards offering tokenised funds. This authorization comes with the condition that the investments are in mainstream assets and that the valuation and settlement arrangements remain unchanged. This move is seen as a groundbreaking step toward embracing technological advancements and reshaping the landscape of the asset management sector.
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Michelle Scrimgeour, Chief Executive of Legal & General Investment Management and Chair of the working group collaborating with the FCA and Britain’s finance ministry, expressed enthusiasm about the potential of fund tokenisation. She highlighted its capacity to revolutionise the industry by fostering greater efficiency, liquidity, enhanced risk management, and the creation of more bespoke portfolios.
The working group, which includes key players like BlackRock, M&G, and Schroders, aims to work closely with regulatory authorities to explore opportunities and navigate challenges associated with tokenised funds. The underlying technology facilitating this transformation is blockchain, a digital ledger that securely records ownership of tokens. While blockchain has been primarily associated with cryptocurrencies, this development signifies its broader application within the global financial system.
The decision by the Financial Conduct Authority aligns with broader efforts in Britain to enhance liquidity within the asset management sector, particularly in the post-Brexit regulatory landscape. The move also reflects a broader trend observed globally, where investment managers and exchanges in the United States, Europe, and Asia have taken tentative steps in offering tokenised funds.
In essence, this approval signals a paradigm shift in the traditional approaches to fund management, embracing technological innovation to meet the evolving needs of investors and enhance the overall efficiency and functionality of the asset management industry. As the industry pioneers this transformative journey, it opens up new avenues for collaboration, exploration, and adaptation to the evolving dynamics of the financial landscape.
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What is financial evolution?
The study of financial management came into its own in the 20th century, evolving through three distinct phases. The first, known as the Traditional phase, spanned from 1920 to 1940. During this time, the focus was on arranging, forming, and issuing funds.
Why AI is revolutionising financial services?
By implementing AI, financial institutions can now make informed decisions based on data, gain valuable insights into the market, and improve their overall performance. This technology has revolutionized the way financial institutions operate, allowing them to stay ahead of the competition and provide better services to their customers. With AI, financial institutions can now analyze vast amounts of data quickly and accurately, enabling them to make better decisions and improve their bottom line. This technology has truly empowered financial institutions to take their business to the next level.
How FinTech is revolutionizing financial services?
In today’s digital age, mobile banking apps and digital wallets have become the norm, providing a cost-effective and hassle-free payment solution that caters to the needs of the modern consumer. Fintech services now offer personalized customer experiences and customized financial advice, which has become synonymous with building stronger customer loyalty and trust.
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The financial world has seen a surge of innovative products thanks to the shadow banking system. These include mortgage-backed securities and collateralized debt obligations (CDOs). These innovations can be categorized into three groups: institutional, product, and process. Each category brings its own unique benefits to the table, making the financial landscape more diverse and dynamic.