FCA Publishes New Regulations for Tokenized Funds, Paving the Way for Blockchain Applications in Asset Management

The UK’s Financial Conduct Authority (FCA) has published Policy Statement PS26/7, permitting tokenised funds to be incorporated into the existing fund regulatory framework and supporting fund managers in maintaining investor records via distributed ledger technology (DLT) systems. Under the new rules, on-chain transaction records may serve as the primary ledger for fund unit transactions; however, firms must develop appropriate resilience plans. The FCA has also introduced an optional Direct-to-Fund (D2F) model, under which the fund or its custodian acts directly as the counterparty to investors’ transactions, streamlining subscription and redemption processes and enabling on-chain settlement. The FCA stated that it will continue evaluating the use of stablecoins, digital cash, and smart contracts in fund settlement and operations.