29/08/24

Jersey Finance welcomes Tokenisation of Real World Asset guidance as evidence of Jersey’s maturity as a virtual asset jurisdiction

Jersey Finance has welcomed the publication this week (28 August) of new guidance by the Jersey Financial Services Commission (JFSC) focusing on the growing trend of asset tokenisation.

Recognising the innovative potential of blockchain technology, the new guidance seeks to promote Jersey’s competitiveness as an international finance centre (IFC) by clarifying the JFSC’s regulatory expectations in relation to this technology.

Published in two sets - ‘Tokenisation of Real-World Assets (RWA)’ and ‘Initial Coin/Token Offering (IC/TO)’ – the guidance is the result of a joined-up approach between industry and regulator, building on original IC/TO guidance published by the JFSC in 2018.

In particular, the RWA Guidance:

• notes the benefits that tokenisation can bring to the finance industry, such as liquidity, accessibility and transparency
• clarifies the JFSC’s principles-based approach and the application of tokenisation to a wide array of products, including equities, units in a fund, and bonds
• underlines the JFSC’s perspective on substance-over-form and the requirement for issuers of tokenised assets to consider the nature of underlying assets, products and activities when submitting applications

In addition, the IC/TO Guidance refreshes the JFSC’s original guidance published in 2018 and reflects updated terminology. Alongside the RWA Guidance, it aims to achieve a regulatory framework that responds to the distinct nature and use of these assets.

Commenting on the certainty the new guidance provides, Elliot Refson, Head of Funds at Jersey Finance, said:

“This new set of guidance provides further evidence of Jersey’s maturity as a virtual assets jurisdiction and should send a clear message to issuers, investors and other stakeholders that it is right at the cutting edge in this space, thanks to the robust, proportionate and forward-thinking approach of our financial services regulator.

“Ultimately, the guidance clarifies that Jersey effectively treats tokenisation in the same way as securitisation. In practice, this means that the regulator grants its consent in relation to the issue of tokens, to confirm that a structure complies with regulation. It is a proactive consent, which can give issuers some much needed certainty and is a marked differentiator compared to competitor jurisdictions.

“This certainty, alongside Jersey having a strong track-record in the securitisation space and having developed such a deep pool of talent to support virtual assets work, puts it in an extremely strong position to maintain momentum in such a rapidly evolving landscape.”

Emphasising the regulator’s commitment to continuing to evolve this guidance through collaboration and further engagement with industry, the JFSC’s Chief Risk Officer Chris Gedrych, added:

“This new guidance underscores the JFSC’s commitment to innovation and support for Jersey as a competitive international finance centre. We will continue to respond proactively and collaboratively to developments in the tokenisation space so that Jersey can continue to benefit from this innovation, while also meeting international standards in fighting financial crime.”

The full set of new guidance notes can be found here.