The UK’s Financial Conduct Authority (FCA) has approved new
rules that allow tokenized funds to operate fully within the existing
authorized fund regime, rather than in separate experimental structures.
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The changes give asset managers a clearer route to keep fund
registers on blockchain and to use an optional Direct‑to‑Fund
(D2F) dealing model, while keeping current investor protection standards in
place.
Onchain Fund Registers Under the Blueprint Model
In Policy Statement PS26/7, the FCA confirms that authorized
funds can run their unitholder registers on distributed ledger technology using
the industry “Blueprint” model.
Onchain transaction records may serve as the primary books
and records for unit deals, and firms do not need a full off‑chain
mirror if they maintain appropriate operational resilience plans.
The guidance applies to UCITS and other authorized funds and
allows registers to sit on public DLT networks if firms meet the regulator’s
expectations on governance, data privacy and financial crime controls. Units in a single share class can be recorded across
multiple blockchains as long as investors’ rights and the structure of charges
remain the same.
Direct-to-Fund Dealing Model to Support Tokenization
The main rule change is the introduction of the optional
Direct‑to‑Fund
dealing model, which alters how subscriptions and redemptions are processed.
Under D2F, the fund or its depositary, rather than the asset manager, becomes
the counterparty to investor trades, so units are issued or canceled directly
against cash flows between investors and the fund in a single step.
The FCA says this should make operations more efficient and
easier to align with onchain or shortened settlement cycles. Following industry
feedback, the regulator will still allow managers to deal as principal in units
of a fund using D2F and to combine different dealing models within an umbrella
structure.
Looking ahead, the FCA outlines a roadmap from tokenized
funds to tokenized assets and ultimately tokenized cash flows, including models
where investors hold tokenized assets in digital wallets and managers use smart
contracts to manage portfolios.
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It also signals openness to waivers that would let funds use
digital cash and stablecoins for settlement and certain expenses, ahead of a
broader crypto asset and stablecoin regime due to take effect in October 2027.
The FCA’s journey toward approving tokenized funds has been
building since 2023, when it collaborated with industry groups to publish the
UK Blueprint model outlining how firms could run tokenized unitholder registers
within existing legal frameworks.
Running parallel to this tokenization roadmap, the FCA has
been developing a comprehensive crypto asset regulatory regime that began with
legislation passed in February 2026. It launched a sterling stablecoin sandbox in
March 2026, and will open firm authorization applications in September ahead of the full regime taking effect next year.
This article was written by Jared Kirui at www.financemagnates.com.
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