UK Regulator Approves Tokenized Funds Under Existing Rules
The United Kingdom's Financial Conduct Authority (FCA) has signed off on new rules and guidance for tokenized funds, making it easier for asset managers to use blockchains within the existing fund regime. The FCA aims to support innovation in the UK asset management sector by allowing firms to integrate blockchain into regulated fund operations without altering existing investor protection frameworks.
The changes, outlined in policy statement PS26/7, give firms a clearer path to integrate blockchain into regulated fund operations. The FCA has delivered a practical framework to give firms confidence in how fund tokenization can operate within its rules. Simon Walls, executive director of markets at the FCA, said that tokenization would play an important role in asset management.
The new rules allow firms to run investor records on distributed ledger technology (DLT) using the industry 'Blueprint' model, and introduce an optional 'Direct-to-Fund' (D2F) dealing model. The FCA has also sketched a roadmap that moves from today's tokenized funds to tokenized assets and, eventually, tokenized cash flows. The regulator remains open to waivers so funds can use digital cash and stablecoins for settlement and certain expenses, and 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, covering stablecoin issuance, trading, custody, and staking. The full framework is due to take effect in October 2027. The FCA's move is seen as a significant step towards bringing tokenized finance into the regulatory perimeter, rather than allowing it to develop in parallel systems.
The FCA's decision is expected to have a positive impact on the UK's asset management sector, as it will allow firms to leverage the benefits of blockchain technology while maintaining investor protection. The regulator's approach is also seen as a model for other countries to follow, as they seek to balance innovation with regulatory oversight.