UK regulator clears path for tokenized funds under existing fund rules

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UK regulator clears tokenized funds

Highlights

FCA policy statement PS26/7 permits authorized funds to run investor records on distributed ledger technology, using onchain records as primary books under specified resiliency conditions.
The new optional direct-to-fund (D2F) dealing model allows funds or their depositaries to directly issue or cancel units against investor cash, streamlining fund operations and onchain settlement.
The FCA remains open to funds settling with digital cash or stablecoins, and plans further consultations through 2026 as part of broader UK financial market infrastructure modernization, with a full cryptoasset regime targeted for October 2027.

FCA sets framework for fund tokenization

As reported by Cointelegraph, policy statement PS26/7 confirms that firms can use distributed ledger technology for investor records and fund dealing within existing rules for authorized funds.

The regulator says tokenization and distributed ledger technology can improve efficiency in fund management and support innovation in the UK asset management sector. The guidance builds on a digital assets roadmap outlined in a January 2025 letter to the prime minister and is meant to bring tokenized finance inside the regulatory perimeter rather than let it develop in parallel systems.

Under PS26/7, firms are allowed to run investor records on DLT using the industry Blueprint model. The FCA says onchain transaction records can serve as the primary books for unit deals without a full offchain duplicate, provided firms maintain appropriate resiliency plans.

The statement also says the Blueprint has already been used to authorize the first tokenized UK undertakings for collective investment in transferable securities, or UCITS. Authorized funds can keep their register on public DLT networks if controls meet FCA standards, including issuing units across multiple blockchains as long as investors' rights and charges remain consistent.

Simon Walls, executive director of markets at the FCA, says tokenization is set to play an important role in asset management and that the regulator has delivered a practical framework to give firms more confidence in how fund tokenization can operate within FCA rules.

Operational changes and broader market impact

The main rule change is an optional direct-to-fund, or D2F, dealing model, in which the fund or its depositary, rather than the manager, becomes the counterparty to investor trades. The FCA says this single-step structure, where units are issued or canceled directly against cash moving between investors and the fund, should make operations more efficient and easier to align with onchain settlement.

Looking ahead, the regulator outlines a longer-term path from tokenized funds to tokenized assets and eventually tokenized cash flows. That includes possible models in which investors hold tokenized assets in digital wallets and managers use smart contracts to administer them.

The FCA also says it remains open to waivers that would allow funds to use digital cash and stablecoins for settlement and certain expenses. It plans to seek further views in 2026 on wider use of DLT in wholesale markets.

The policy statement arrives after the FCA opened a consultation earlier this month on guidance for its broader cryptoasset regime, covering stablecoin issuance, trading, custody and staking. A full framework is due to take effect in October 2027, signalling that tokenized fund rules are becoming part of a wider UK effort to modernize financial market infrastructure.

Our earlier coverage of Consensus 2026 in Miami highlighted how the conversation has shifted from crypto’s future to real-world deployment of digital-asset infrastructure across mainstream finance. We noted that stablecoins and tokenized real-world assets are increasingly being treated as settlement and market-structure tools, with major institutions focusing on custody, regulation, and live onchain products such as tokenized treasuries and private credit.

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