What is the FCA’s new approach to tokenized funds?
The United Kingdom’s Financial Conduct Authority (FCA) has introduced new rules and guidance aimed at facilitating the integration of blockchain technology within traditional asset management structures. In a policy statement released on Thursday, titled PS26/7, the FCA outlined how tokenized funds can be included within the existing regulatory framework for funds, moving away from experimental systems and allowing blockchain to operate within established market norms.
These changes mark a significant step toward modernizing financial infrastructure and improving the efficiency of fund management. Tokenization and Distributed Ledger Technology (DLT) have the potential to revolutionize the industry by simplifying record-keeping and enhancing transparency. The FCA expressed its commitment to supporting innovation in the UK’s asset management sector, making it easier for firms to integrate blockchain into their operations without abandoning investor protection standards. This push is part of a broader initiative detailed in the UK’s digital assets roadmap, which was first outlined in a January 2025 letter to the Prime Minister.
How does this affect asset managers and tokenized funds?
Under the new framework, firms are now permitted to run investor records on DLT systems, using the industry-standard “Blueprint” model. This enables on-chain transaction records to serve as the primary books for unit deals without requiring an off-chain duplicate, provided that firms implement “appropriate resiliency plans.” The Blueprint has already been successfully used to authorize the first tokenized UK UCITS (Undertakings for Collective Investment in Transferable Securities), a key structure for mutual funds.
Importantly, authorized funds will now be able to maintain their registers on public DLT networks, provided that they meet the FCA’s required standards for security and transparency. This means that funds can issue units across multiple blockchains while maintaining investor rights and consistent fee structures.
Simon Walls, the FCA’s executive director of markets, emphasized that the new rules would allow tokenization to “play an important role in asset management.” The FCA’s efforts are designed to create a clear regulatory framework that encourages firms to explore tokenization with confidence, enabling them to take advantage of blockchain’s benefits while staying within the bounds of established regulatory oversight.
Investor Takeaway
What are the key regulatory changes?
The FCA has introduced an optional new “Direct‑to‑Fund” (D2F) model for dealing with investors. Under this model, the fund or its depositary, rather than the asset manager, acts as the counterparty to investor trades. This streamlines the process, allowing units to be issued or canceled directly against the cash transferred between investors and the fund. The FCA believes this model will help make fund operations more efficient and better aligned with on-chain settlement processes.
This new D2F structure is particularly noteworthy because it simplifies and accelerates the process of managing trades, reducing operational complexity for asset managers and making blockchain integration easier. It also improves the alignment between traditional fund management and blockchain-based systems.
What are the future prospects for tokenized assets in the UK?
Looking to the future, the FCA envisions a broader adoption of tokenized assets within the UK financial sector. The regulator is particularly interested in extending this tokenization to cash flows, including the use of smart contracts to manage investments directly in digital wallets. The FCA has indicated that it will remain open to waivers that would allow funds to use digital cash and stablecoins for settlement and expenses. This could pave the way for more expansive use of blockchain technologies across various financial market sectors.
In 2026, the FCA plans to seek further feedback on the potential for greater use of DLT in wholesale markets, which could lead to even more widespread adoption of blockchain technologies in traditional financial services.
What does this mean for the wider regulatory landscape?
The FCA’s guidance on tokenized funds follows the launch of a consultation on its broader cryptoasset regime, which covers areas such as stablecoin issuance, trading, custody, and staking. This consultation, which opened earlier this month, is part of a broader push to create a comprehensive framework for digital asset regulation in the UK. The FCA has set a deadline of October 2027 for the implementation of a full regulatory framework that will cover these areas.