UK FCA Approves Framework for Tokenized Funds Within Existing Regulations

New Rules Enable Blockchain Integration in Asset Management

The Financial Conduct Authority has introduced new rules to support tokenized funds, allowing asset managers to integrate blockchain technology within the existing regulatory framework. The policy, outlined in PS26/7, aims to modernize fund operations while maintaining current investor protection standards.

The regulator said distributed ledger technology can improve efficiency across fund management processes and confirmed its commitment to fostering innovation in the UK’s financial sector.

Onchain Registers and Direct-to-Fund Model Introduced

Under the updated guidance, firms can maintain investor registers directly on blockchain networks using approved models, eliminating the need for duplicate off-chain records if resilience measures are in place. The rules also permit issuing fund units across multiple blockchains, provided consistency in investor rights is maintained.

A key feature is the optional Direct-to-Fund dealing model, where transactions occur directly between investors and the fund, streamlining settlement and aligning operations with onchain systems.

Tokenized Finance Moves Into Regulatory Mainstream

The move signals a broader effort to bring tokenized finance into regulated markets. The FCA also indicated openness to future use of digital cash and stablecoins, with further consultations expected as part of its long-term digital asset roadmap.