The Financial Conduct Authority (FCA), the UK’s financial services regulator, has published new guidance designed to make it easier for asset managers to adopt fund tokenisation.
The guidance clarifies how firms can deploy distributed ledger technology (DLT) within the regulator’s existing rulebook. Alongside this, updated rules introduce an optional Direct to Fund (D2F) model, which allows investors to transact directly with a fund — regardless of whether it is a traditional or tokenised structure — streamlining the dealing process.
Tokenisation involves recording an asset, or ownership of an asset, on a distributed ledger. The approach carries the potential to reduce costs and broaden access to investment opportunities for a wider pool of investors. The FCA developed the guidance in close consultation with the industry, with the dual aim of driving innovation and improving operational efficiency across asset management. The accompanying policy statement also outlines a roadmap detailing how fund tokenisation may evolve over time as part of the regulator’s wider digital assets strategy.
The UK is home to around 2,600 asset management firms collectively overseeing £16.5tn in assets for domestic and international clients. Supporting growth and innovation within this sector forms a key pillar of the FCA’s strategy for 2025 to 2030.
FCA executive director of markets Simon Walls 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.’
Investment Association director of innovation and operations unit and director of Engine John Allan 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.’
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