UK Regulator Greenlights On-Chain Registers for Tokenized Funds, Streamlining Asset Management
The UK's FCA has issued new guidance (PS26/7) allowing regulated funds to use blockchain for investor registers and introducing a 'Direct-to-Fund' model, signaling a major step for
FCA Embraces Blockchain for UK Funds
The United Kingdom's Financial Conduct Authority (FCA) has taken a decisive step towards modernizing its financial infrastructure, issuing new rules and guidance under Policy Statement PS26/7 that will allow regulated funds to integrate blockchain technology for core operations. This move is designed to simplify and streamline the management of tokenized funds, enabling asset managers to utilize distributed ledger technology (DLT) within existing regulatory frameworks rather than requiring entirely new, experimental structures.
The FCA's announcement underscores a commitment to fostering innovation within the UK's asset management sector, a key component of its broader digital assets roadmap. By providing a practical framework, the regulator aims to instill confidence among firms looking to leverage tokenization, ensuring that these advancements occur within the established perimeter of investor protection.
On-Chain Registers and the 'Blueprint' Model
A cornerstone of the new guidance is the explicit approval for firms to maintain investor records directly on DLT, utilizing the industry-developed 'Blueprint' model. This means that on-chain transaction records can now serve as the primary books for unit deals, eliminating the need for a full, redundant off-chain duplicate, provided robust resiliency plans are in place. This clarity is crucial for reducing operational overhead and enhancing transparency.
The FCA has confirmed that authorized funds can maintain their registers on public DLT networks, provided they meet stringent control standards. This flexibility extends to issuing units across multiple blockchains, as long as investors' rights and charges remain consistently applied. This pragmatic approach acknowledges the multi-chain reality of the digital asset landscape while upholding regulatory integrity.
Introducing the Direct-to-Fund (D2F) Dealing Model
Further enhancing efficiency, PS26/7 introduces an optional 'Direct-to-Fund' (D2F) dealing model. Under this model, the fund itself, or its depositary, acts as the direct counterparty to investor trades, rather than the fund manager. This single-step process involves units being issued or canceled directly against cash movements between investors and the fund. The FCA anticipates that this structure will significantly improve operational efficiency and better align fund operations with on-chain settlement mechanisms, paving the way for more seamless digital asset transactions.
A Glimpse into the Future of Tokenized Finance
The FCA's current policy statement is not an endpoint but rather a foundational step in a broader roadmap for tokenized finance. The regulator envisions a progression from today's tokenized funds to tokenized assets, and eventually, to fully tokenized cash flows. This future state could see investors holding tokenized assets in digital wallets and fund managers leveraging smart contracts for automated management.
Crucially, the FCA has indicated its openness to granting waivers that would allow funds to use digital cash and stablecoins for settlement and various expenses. Further consultations are planned for 2026 to explore the wider application of DLT in wholesale markets. This forward-looking stance positions the UK at the forefront of integrating digital assets into traditional finance, building on earlier consultations for a wider cryptoasset regime, with a full framework anticipated by October 2027.
Key points: The FCA's PS26/7 legitimizes on-chain investor registers for UK regulated funds, reducing operational complexity and enhancing transparency. • A new 'Direct-to-Fund' (D2F) dealing model offers a more efficient, single-step transaction process for fund units, directly aligning with on-chain settlement. • This regulatory clarity positions the UK as a progressive jurisdiction for tokenized funds, fostering innovation within existing investor protection frameworks. • The move is part of a broader FCA roadmap towards fully tokenized assets and cash flows, with future considerations for stablecoin and digital cash settlement. • Firms can now confidently explore blockchain integration for fund operations, with clear guidance on compliance and resiliency.
