The UK’s Financial Conduct Authority (FCA) has formally approved new rules and guidance that allow fund managers to integrate blockchain technology into regulated fund operations without the need for separate experimental structures. In a policy statement published on Thursday, PS26/7, the regulator confirmed that tokenization and distributed ledger technology (DLT) can be used within the existing fund regime, marking a significant step in the UK’s digital assets roadmap.
What the new FCA rules mean for tokenized funds
The FCA’s policy statement provides a clear framework for firms to maintain investor records on public DLT networks, using the industry-developed ‘Blueprint’ model. This means onchain transaction records can serve as the primary books for unit deals, provided that appropriate resiliency plans are in place. The regulator has already used this Blueprint to authorize the first tokenized UK UCITS funds.
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A key change is the introduction of an optional ‘Direct-to-Fund’ (D2F) dealing model. Under this model, the fund or its depositary, rather than the fund manager, acts as the counterparty to investor trades. This single-step process, where units are issued or canceled directly against cash moving between investors and the fund, is designed to improve operational efficiency and align with onchain settlement.
Broader implications for the UK asset management sector
The move reflects a broader push by UK policymakers to bring tokenized finance into the regulatory perimeter, rather than allowing it to develop in unregulated parallel systems. Simon Walls, executive director of markets at the FCA, stated that tokenization will ‘play an important role in asset management’ and that the regulator has delivered a practical framework to give firms confidence.
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The FCA’s roadmap progresses from today’s tokenized funds to tokenized assets and, eventually, tokenized cash flows. The regulator has indicated it remains open to waivers for using digital cash and stablecoins for settlement and certain expenses, and plans to seek further views in 2026 on wider DLT use in wholesale markets.
Why this matters for investors and the industry
This development is significant because it provides regulatory clarity for asset managers looking to adopt blockchain technology without altering existing investor protection frameworks. By integrating tokenization into the existing rulebook, the FCA aims to make fund management more efficient, reduce operational costs, and potentially open up new distribution channels. This could lead to faster settlement times, lower fees, and greater transparency for investors.
The policy statement follows a consultation on guidance for the UK’s wider cryptoasset regime, covering stablecoin issuance, trading, custody, and staking, with a full framework expected to take effect in October 2027.
Conclusion
The FCA’s approval of tokenized funds under existing rules represents a pragmatic and forward-looking approach to financial innovation. By providing a clear regulatory path, the UK is positioning itself as a leading hub for digital asset management, balancing innovation with investor protection. The move is likely to accelerate the adoption of blockchain technology in mainstream finance.
FAQs
Q1: What is a tokenized fund?
A tokenized fund is a traditional investment fund, such as a UCITS, that uses blockchain technology to record ownership and process transactions. Instead of a paper or electronic register, investor holdings are recorded on a distributed ledger.
Q2: How does the new ‘Direct-to-Fund’ model work?
The Direct-to-Fund (D2F) model allows investors to deal directly with the fund or its depositary, rather than through a fund manager. This simplifies the transaction process, making it a single step where units are issued or canceled against cash moving directly between the investor and the fund.
Q3: Does this change investor protections?
No. The FCA has stated that these changes are designed to modernize market infrastructure without altering existing investor protection frameworks. All existing rules regarding fund management, custody, and investor rights remain in place.
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