From blueprint to production: The FCA finalises its fund tokenisation framework

Introduction

The UK has for some time been considering how best to accommodate fund tokenisation within the existing regulatory framework. As a key milestone in that process, the FCA published CP25/28 (the Consultation Paper) which set out the FCA’s initial proposals on the use of distributed ledger technology (DLT) in authorised funds and on an optional new Direct to Fund (D2F) dealing model. We summarised those initial proposals in our previous blog post and briefing. In response to industry feedback on the Consultation Paper’s proposals, the FCA published PS26/7 (the Policy Statement) on 30 April 2026 which contains the final form rules and guidance. This briefing focuses on the key changes the FCA has implemented in response to that feedback.

The two legal instruments appended to the Policy Statement came into force on 30 April 2026. There are no transitional provisions of general application, meaning firms are broadly subject to the new rules and guidance now (subject to one narrow transitional concession which applies to the deletion of certain guidance on cash concentration limits, which firms may disregard until 29 April 2027.)

Tokenised authorised funds

The Policy Statement frames how DLT may be used in the operation and maintenance of the register of an authorised fund. The final guidance applies to the authorised fund manager (AFM) and depositary of an authorised unit trust, authorised contractual scheme or investment company with variable capital which is a UCITS scheme or non-UCITS retail scheme (NURS) and is extended (with modifications) to qualified investor schemes (QIS) and long-term asset funds (LTAFs).

Key points for impacted AFMs and depositaries:

• Control of the register: control of the register remains the key regulatory anchor, even where the register is recorded, or uses records, on DLT; the responsible firm must, broadly, be able to amend that register without requiring the consent or agreement of any third party. The FCA confirms that its guidance is illustrative and that firms may use “alternative ledger-based mechanisms or verifiable governance options.”  Examples given include smart contracts, off-chain contractual functionality, direct control of private keys and “master-node” functions.
• Changes to a register made by a third party: the FCA clarifies that third parties may submit changes to the DLT register of a fund, provided the responsible firm can make unilateral changes (including to reverse incorrect entries) and has processes to identify incorrect entries and take remedial action.
• Multiple blockchains within the same class: a useful product-design clarification is that the responsible firm may use multiple DLT networks even within the same class of fund units. The Policy Statement gives an example of an arrangement involving units in the same class using blockchain A and blockchain B, which is acceptable provided the arrangements are otherwise compliant and “the underlying rights of unitholders, and the charges per unit taken from scheme property, should remain the same within a class.” This position will likely support multi-network distribution models, but it should not be seen as a licence for firms to create economically different sub-classes without treating them as separate classes.
• Smart contracts and whitelisting: firms must ensure transfers of tokenised units comply with the FCA’s existing requirements. The Policy Statement confirms that smart contract-based whitelisting (i.e. arrangements to transfer tokens only to known account numbers that have been verified by the AFM as belonging to specific eligible investors) and allow-list arrangements (i.e. where a list maintained by the firm references a set of eligible addresses) may be valid methods for restricting transfers in the context of DLT-based transfers. However, firms should note that smart contracts used for verification or other fund operations should be audited regularly to meet evolving industry standards.

D2F dealing model

Under the new D2F dealing model, it is envisaged that units of an authorised fund are issued and cancelled directly between the fund (or its depositary) and the unitholder, rather than through the AFM acting as principal. D2F is optional and available for conventional as well as tokenised funds. As we explained in our earlier briefing, D2F is intended to reduce operational overheads and facilitate atomic settlement on-chain for newly-issued units. The FCA has largely finalised the rules as consulted on, with three notable shifts:

• AFMs may deal as principal in D2F units: the FCA had previously proposed a prohibition on AFMs dealing as principal but this has been dropped, after respondents flagged that it could prevent AFMs from providing liquidity where a tokenised fund permits 24/7 secondary settlement. For tokenised secondary markets, this is a meaningful liberalisation.
• Unattributable cash and enhanced reconciliations: funds using D2F are required to operate a dedicated Issues and Cancellations Account (IAC) for handling investor payments; the Policy Statement confirms all sums in an IAC are the fund's property. Respondents argued the Consultation Paper's earlier proposal (that unattributable sums in the IAC be returned or moved to a client money account of the AFM) would be disproportionately costly. In light of that feedback, the new rules broadly require: (i) daily IAC reconciliation (or as often as the fund deals); (ii) prompt attribution of receipts to a specific sub-fund (or to the fund itself where it is not an umbrella fund so has no sub-funds); and (iii) recording of unattributable sums as “unattributed scheme money”. If a sum is still unattributable at the end of the fifth business day after receipt, the AFM must instruct its return to the sender. Where the AFM has tried to return the sum but cannot (e.g. sender cannot be identified), it may move the sum into a separate bank account belonging to the fund, used only for holding unmatched cash. The upshot is that unattributed cash remains in the fund's own account rather than being moved to a separate AFM client money account.
• Omnibus IACs and protected cell legislation: the FCA continues to take a cautious view on omnibus IACs operated at umbrella level, citing the segregated-liability requirements applicable to ICVCs and ACSs and corresponding trust law principles for AUTs (together, the relevant laws on segregated liability). The FCA acknowledges that primary legislation may need to be amended to provide a clearer legal basis for D2F that remains consistent with the protected cell legislation. In the interim, firms proposing to use an omnibus IAC must obtain legal advice that the intended approach complies with the relevant laws on segregated liability, taking into account contagion risk, the strategy, risk profile and target market of each sub-fund as well as its use of leverage and the likelihood of late payment by investors in the target market. As a practical matter, most firms will need to operate per-sub-fund IACs unless their dealing flows can be sequenced sufficiently to avoid issues.

Key clarifications on compliance with existing requirements in a DLT context

The Policy Statement makes a number of clarifications to help funds using DLT comply with their existing obligations, which include:

• On-chain records: where the responsible firm uses DLT to establish and maintain the register in compliance with the existing rules, the on-chain record of transactions may be considered the primary books and records for that transaction. Firms do not need to maintain a duplicate off-chain “mirror” where they have appropriate resilience and backup plans in place.
• Operational resilience: the FCA has not amended conventional register-related operational resilience obligations for funds that use DLT. As a result, the responsible firm is still required to: (i) have systems capable of aggregating information held on DLT (including where a unitholder holds positions through different wallets); (ii) address DLT network outages in its risk management policies and procedures; (iii) have alternative processes for investors to buy, sell or transfer units where fiat money or off-chain processes are needed; and (iv) have procedures in place for winding up the fund if the DLT network becomes unavailable for an extended period.
• Public DLT networks: the FCA confirms that firms may use public DLT networks for fund management where they have adequate controls in place. The FCA does not view the use of public DLT networks within fund management as outsourcing.

The Policy Statement also more broadly positions fund tokenisation within the forthcoming UK cryptoasset regime, which we covered in our series of related blog posts. Notably, the FCA has clarified the following points:

• Exclusion for UCITS/AIF managers extended: the FCA confirms that the exclusion from certain authorisation requirements for UCITS and AIF managers under the Regulated Activities Order is preserved for the new cryptoasset activities (under the Cryptoasset Regulations 2026). Consequently, UCITS and AIF managers do not need separate cryptoasset permissions for activities carried on with, or for the purposes of, managing the fund, including operating a register on DLT. This is a material point for tokenised fund operating models.
• MLR registration: consequential amendments to the UK Money Laundering Regulations (MLRs) mean firms authorised for the new cryptoasset activities (and specified investment cryptoasset firms) will not need to separately register under the MLRs as cryptoasset exchange providers or custodian wallet providers. Instead, such firms will only need to notify the FCA before, or within 28 days of, starting to act as such (and within 28 days of ceasing to do so). The rest of the MLRs will continue to apply in full.
• Tokenised assets and stablecoin settlement: the FCA confirms that its existing rules do not prevent authorised funds from investing in tokenised forms of eligible assets. Ahead of final stablecoin standards coming into force in October 2027 under the Cryptoasset Regulations 2026, the FCA is open to receiving applications to modify or waive existing rules to facilitate stablecoin settlement of unit deals. Firms may use the draft modification template included in the Consultation Paper as a template for these applications.
• Standards and peer-to-peer trading: the FCA declines to set consistent token, data and messaging standards specifically applicable to tokenised fund unit trading. Where firms permit peer-to-peer secondary trading in tokenised fund units, the FCA expects clear and proportionate disclosures including on settlement finality, gas-fee allocation and indicative pricing via oracles (or equivalents).

Looking ahead

The Policy Statement does not stop at fund registers; it also reaffirms the FCA’s three-stage roadmap. Broadly, that roadmap indicates the FCA will first prioritise regulating tokenised authorised funds before shifting its focus to tokenised assets. In the final stage it will then consider the regulation of tokenised cash flows and composable finance.

Firms designing tokenised fund operating models should also take note of two other FCA consultation processes. First, the Policy Statement signals the FCA will consult further on regulatory principles for wider wholesale market adoption of DLT later in 2026. Second, such firms should separately consider the potential impact of the FCA’s draft perimeter guidance for the new regulated cryptoasset activities set out in CP26/13; we covered that consultation, which remains open until 3 June 2026, in our previous post.

For firms that have been waiting for regulatory certainty before progressing tokenised authorised fund structures, the framework is now much clearer.