The UK’s top investment body called on government and regulators to harness the benefit of cryptocurrencies and decentralised finance today, as it claimed the industry was on the cusp of a “major technological transformation”.
In a new “Investing for the Future” report, the Investment Association (IA) outlined a vision for “‘Investment Fund 3.0” which it said would be built on “technological innovation” and a “forward-looking regulatory framework”.
The IA is now pushing ministers and the Financial Conduct Authority to create a taskforce to harness the benefits of decentralised finance – a financial ecosystem based on blockchain technology – and to establish regulation for tokenised funds to operate in the UK.
“At the heart of the vision for Investment Fund 3.0 will likely be the increasing adoption of tokenisation, which will ultimately reduce costs for consumers and improve efficiency in the delivery of funds, through quicker settlement and improved transparency of transactions,” the IA said in a statement.
“Tokenisation may also broaden the assets held within a fund by increasing access to private markets and illiquid assets.”
The report has also proposed the creation of regulated routes for cryptocurrencies and digital asset exposure for investment managers, and an assessment of the eligibility of cryptoassets among some portfolios.
Investment Association boss Chris Cummings said modernisation was essential in the industry.
“With the ever-quickening pace of technological change, the investment management industry, regulator and policy makers must work together to drive forward innovation without delay,” Cummings 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.”
The calls for a new regulatory framework come as the Bank of England this week called for a new regulatory regime for crypto assets to safeguard financial stability, after recent plunge in crypto markets.
“This underscored the need for enhanced regulatory and law enforcement frameworks to address developments in crypto asset markets and activities,” the bank said in its quarterly Financial Stability Report.