FCA Sets Out Guidance to Support Innovation in Fund Tokenisation

WHY THIS MATTERS: This new regulatory guidance from the FCA delivers the critical clarity the asset management sector has been demanding to accelerate the adoption of fund tokenisation. The publication officially removes significant ambiguity surrounding the use of Distributed Ledger Technology (DLT) for representing asset ownership within the UK’s existing legal framework. This is a major regulatory pivot that streamlines how the UK’s £16.5 trillion asset base can integrate blockchain-based efficiency. Crucially, the introduction of the optional Direct to Fund (D2F) model—which permits investors to transact directly with a fund—lays the groundwork for massive cost reductions and dramatically improved market access. By building a practical pathway for firms to innovate securely, the regulator is actively supporting the UK’s position as a leading global financial hub for the emerging digital market infrastructure. This is an immediate value signal: the foundational legal barriers for digital funds have just been dismantled.

Asset managers will find it easier to unlock the benefits of fund tokenisation, following the publication of new guidance by the Financial Conduct Authority (FCA). The guidance sets out how firms can use distributed ledger technology (DLT) within the regulator’s existing rules.  

New rules will also make fund dealing more efficient, including an optional Direct to Fund (D2F) model. This enables investors to deal directly with the fund, whether traditional or tokenised.  

Tokenisation is a way of representing an asset, or ownership of an asset, using distributed ledger technology. Tokenisation has the potential to lower costs and open up investment opportunities to a wider audience.  

The FCA has worked closely with industry to develop this guidance and rules to support innovation and improve efficiency for asset managers.  

Simon Walls, executive director of markets at the FCA said: “Tokenisation has the potential to play an important role in asset management, and its adoption will be driven by firms and investors. 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, innovation and operations unit and director, Engine at the Investment Association, said:  “This milestone represents a meaningful advance in the UK’s approach to innovating funds market infrastructure. 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.” 

The UK is a leading asset management hub, with around 2,600 firms managing £16.5 trillion of assets for UK and global clients. Supporting growth and innovation in the sector is a core part of the FCA’s strategy. 

The policy statement also sets out how fund tokenisation could develop over time as part of the FCA’s roadmap for digital assets.  

FF NEWS TAKE: This unequivocally moves the needle for wholesale finance. The FCA’s approach, endorsed by industry bodies, provides the necessary legal confidence for asset managers to migrate legacy processes to DLT, securing the UK’s leadership in funds market innovation. The true test now lies in the practical, operational adoption of the Direct to Fund (D2F) model. We must watch for which major asset houses launch the first publicly accessible tokenised funds and how swiftly they adopt public-chain architecture to maximize efficiency and democratize access.