The British trade association for investment managers has urged the government and the UK's financial watchdog to create a framework for cryptocurrency and other types of decentralised finance (DeFi).

“The investment management industry has a vital role in helping people provide for their futures into old age,” said Chris Cummings, chief executive of the Investment Association. “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.

“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 comments come after the organisation launched a new report which outlines a vision for the ‘Investment Fund 3.0’ built on “technological innovation, a forward-looking regulatory framework, and improved engagement with consumers”.

The document identifies a potential role of native digital assets in future funds which would be dependent on new regulation, with the IA proposing the establishment of regulated routes for native digital asset exposure, and an assessment of the eligibility of cryptoassets within UCITS and domestic funds for well-diversified portfolios.

The organisation said that recent market volatility makes clear the importance of defining rules for cryptoassets.

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