FCA clears blockchains for UK’s £16.5 trillion fund sector
The Financial Conduct Authority has set out final guidance and rules letting the UK’s 2,600 asset managers tokenise authorised funds on distributed ledger technology, covering £16.5 trillion of assets managed for UK and global clients.
The package introduces an optional Direct to Fund (D2F) dealing model, alongside guidance clarifying how managers can run tokenised fund registers under existing regulatory obligations.
Tokenisation records ownership of an asset on a shared digital ledger rather than a centralised database, and the FCA frames it as a route to lower fund costs and broaden retail access to investment products.
The new policy statement closes the loop on an earlier consultation, which the regulator published on 14 October 2025 and consulted on through to December 2025.
The FCA had already authorised the first tokenised UK UCITS under the industry’s Blueprint model in January 2025, and the new rules build on that precedent rather than replace it.
The Direct to Fund model lets investors transact directly with the fund or its depositary, rather than through an authorised fund manager acting as principal.
The current UK structure, in which the manager sits between the fund and the investor and runs a “box” of units, is largely unique to Britain and adds operational cost.
D2F brings the UK closer to practice in Ireland and Luxembourg, where direct dealing is standard, and removes the need for the back-to-back transactions that complicate tokenised settlement.
The model is optional, and managers can continue to operate the existing box and principal model where it suits them.
“Tokenisation has the potential to play an important role in asset management, and its adoption will be driven by firms and investors,” said Simon Walls, Executive Director of Markets at the FCA.
“We have focused on delivering what the market has asked for: a clear, practical framework that provides confidence in how fund tokenisation can operate within our rules, both now and into the future.”
John Allan, Director of the Innovation and Operations Unit and director of Engine at the Investment Association, said the guidance provides confidence around public chain models where the right controls are in place, alongside the use of digital cash tools for operational needs.
Allan added that D2F gives firms a stronger foundation to align innovation ambitions with long-term operating choices.
“This milestone represents a meaningful advance in the UK’s approach to innovating funds market infrastructure,” he said.
“Working in collaboration with the investment management industry, the FCA has produced detailed guidance that provides confidence around public chain models where the right controls are in place, and the use of digital cash tools for operational needs.
“Alongside wider work on wholesale digital market infrastructure, this guidance and the increased optionality provided by D2F gives firms a stronger foundation to align innovation ambitions with long term operating choices.”
What the rules cover
The guidance confirms that fund managers can use public blockchains as well as private permissioned networks, provided they meet existing requirements on consumer protection, data privacy and operational resilience.
Managers must retain the ability to make unilateral updates to the unitholder register, which the FCA accepts can be achieved through DLT functions such as minting and burning tokens, master node controls, private key management or contractual arrangements with unitholders.
The policy statement also sets out a roadmap for further evolution, including the use of digital cash instruments and qualifying stablecoins for unit settlement, and a future review of portfolio management rules to accommodate retail-scale tokenised models.
What it means for the UK tech and asset management stack
A Calastone report cited by the FCA estimated aggregate savings of $135 billion across the UK, EU and US fund industry from full tokenisation, driven mainly by reductions in reconciliation and data-sharing costs.
Today’s rules give UK managers the regulatory cover to capture a share of that opportunity without further consultation.
The FCA’s technology-positive stance also opens commercial space for fintech firms, custodians and stablecoin issuers, all of which were named in the consultation as parties of interest.
The ruling lands alongside the FCA’s broader digital assets agenda, which includes the cryptoasset authorisation gateway opening on 30 September 2026 and the wider regime taking effect in October 2027.
Read together, the two timelines position the UK to compete with Singapore and the EU on tokenised finance infrastructure, with London cited in this year’s Global Financial Centres Index as the second-ranked global hub.
