The United Kingdom's Financial Conduct Authority has signed off on new rules and guidance for tokenized funds, providing asset managers with a clear and formal path to integrate blockchain technology into regulated fund operations without departing from the existing regulatory framework.

FCA Formalises Onchain Record-Keeping for UK Funds

In a policy statement published Thursday, PS26/7, the FCA confirmed that tokenization and distributed ledger technology could make fund management more efficient and stated its intention to support innovation in the UK asset management sector. The announcement forms part of a digital assets roadmap first outlined in a January 2025 letter to the prime minister.

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. The FCA noted that the Blueprint has already been used to authorise the first tokenized UK undertakings for collective investment in transferable securities.

Direct-to-Fund Model Streamlines Settlement

The central rule change introduced by PS26/7 is an optional Direct-to-Fund dealing model, under which the fund or its depositary, rather than the manager, acts as the counterparty to investor trades. Deals are executed in a single step, with units issued or cancelled directly against cash moving between investors and the fund. The FCA said this structure is designed to make fund operations more efficient and better aligned with onchain settlement mechanics.

Simon Walls, executive director of markets at the FCA, said 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 its rules.

Roadmap Points Toward Tokenized Cash Flows

Looking ahead, the FCA has sketched a roadmap that progresses from today's tokenized funds to tokenized assets and, eventually, tokenized cash flows. This includes models where investors hold tokenized assets in digital wallets and managers use smart contracts to administer them. The regulator said it remains open to waivers allowing funds to 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.

Broader Crypto Regulatory Framework Takes Shape

The policy statement arrives alongside a broader push by UK policymakers to bring tokenized finance into the regulatory perimeter rather than allowing it to develop in parallel systems. Earlier this month, the FCA opened a consultation on guidance for its wider cryptoasset regime, covering stablecoin issuance, trading, custody and staking, ahead of a full framework due to take effect in October 2027. Authorised funds may also maintain their register on public DLT networks, provided controls meet FCA standards, including the ability to issue units across multiple blockchains as long as investors' rights and charges remain consistent.