UK regulator clears path for tokenized funds within existing rules

The FCA signs off rules to let UK funds keep registers onchain and add a new Direct‑to‑Fund dealing model, aiming to simplify tokenized funds inside the existing regime.

The United Kingdom’s financial regulator has signed off on new rules and guidance for tokenized funds, aiming to make it easier for asset managers to use blockchains within the existing fund regime rather than in separate experimental structures.

In a Thursday policy statement, PS26/7, the Financial Conduct Authority (FCA) said tokenization and distributed ledger technology (DLT) could make fund management more efficient and that it wants to “support innovation in the UK asset management sector,” as part of a digital assets roadmap first outlined in a January 2025 letter to the prime minister.

The changes give firms a clearer path to integrate blockchain into regulated fund operations, as policymakers seek to modernize market infrastructure without altering existing investor protection frameworks, and reflect a broader push to bring tokenized finance into the regulatory perimeter rather than allowing it to develop in parallel systems.

Simon Walls, executive director of markets at the FCA, said in the release that tokenization would “play an important role in asset management,” and that the regulator had delivered a practical framework to give firms confidence in how fund tokenization can operate within the FCA’s rules.

How tokenized funds move into the UK rulebook

PS26/7 allows firms to run investor records on DLT using the industry “Blueprint” model, confirming that onchain transaction records can serve as the primary books for unit deals without requiring a full off-chain duplicate, provided “appropriate resiliency plans” are in place.

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The FCA said the Blueprint has already been used to authorize the first tokenized UK undertakings for collective investment in transferable securities (UCITS), and that authorized funds can maintain their register on public DLT networks if controls meet its standards, including issuing units across multiple blockchains as long as investors’ rights and charges remain consistent.

FCA guidance for fund tokenization. Source: FCA

The main rule change is an optional “Direct‑to‑Fund” (D2F) dealing model, where the fund or its depositary, rather than the manager, is the counterparty to investor trades. Deals go through a single step in which units are issued or canceled directly against cash moving between investors and the fund, a structure the FCA says is intended to make fund operations more efficient and easier to align with onchain settlement.

Looking ahead, the FCA sketches a roadmap that moves from today’s tokenized funds to tokenized assets and, eventually, tokenized cash flows, including models where investors hold tokenized assets in digital wallets and managers use smart contracts to manage them.

The regulator says it remains open to waivers so funds can use digital cash and stablecoins for settlement and certain expenses, and that it will seek further views in 2026 on wider use of DLT in wholesale markets

The policy statement comes after the FCA opened a consultation on guidance for its wider cryptoasset regime earlier this month, covering stablecoin issuance, trading, custody and staking, ahead of a full framework due to take effect in October 2027.

Cointelegraph reached out to the FCA for comment but had not received a response by publication.

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