Question to the HM Treasury:

To ask His Majesty's Government what steps they are taking to enable the adoption of tokenised funds using public blockchains while safeguarding against financial crime and systemic risk.

The Financial Services Growth and Competitiveness Strategy set out a comprehensive ten-year plan to deliver growth and attract investment. Championing innovation is a key priority within this strategy, and the Government is working closely with industry stakeholders and regulators to remove barriers and unlock opportunities presented by new technologies.

Using distributed ledger technology to tokenise funds could support financial market efficiency by enabling more efficient, real-time data sharing which could lower operational costs and enhance resilience.

The Government has published its Wholesale Financial Markets Digital Strategy, which sets out the key steps the UK has to take to digitalise its financial markets, including through the tokenisation of assets. The Government is taking forward various measures in this space, in particular the Digital Securities Sandbox. The DSS provides a bespoke regulatory framework that enables firms to test, scale and roll out the tokenisation of securities. The Financial Conduct Authority (FCA) also recently launched a consultation for a new Direct2Fund model, allowing investors to engage directly with investment funds through blockchain technology.

To manage financial crime risks, fund managers and UK cryptoasset firms continue to be subject to the Money Laundering and Terrorist Financing Regulations, requiring strict supervision, customer checks and suspicious activity reporting.