FCA approves DLT rules for funds

TLDR

The UKs Financial Conduct Authority has formally allowed regulated funds to use blockchain infrastructure under existing fund rules.

1. The FCAs PS26/7 policy lets tokenized funds operate inside the standard UK fund regime, including keeping investor registers directly on DLT.
2. The framework aims to cut friction in fund admin and settlement and could accelerate institutional adoption of tokenized assets without weakening investor protections.
3. Next to watch are real fund launches, experiments with digital cash for settlement, and how this dovetails with the wider UK crypto regime expected by October 2027.

Deep Dive

1. What The FCA Has Approved

The FCA has approved new rules and guidance (policy statement PS26/7) that let asset managers use blockchain and distributed ledger technology within existing UK regulated fund structures, rather than in separate sandbox vehicles.

Firms can use the industry Blueprint model so that onchain transaction records can be the primary books for unit deals, provided they have strong resiliency plans. The FCA notes this model is already used to authorize the first tokenized UK UCITS funds.

The rules also introduce an optional Direct to Fund dealing model, where the fund or its depositary, not the manager, is the counterparty to investors, making it easier to align unit issuance and cancellation with onchain cash movements. Registers can sit on public blockchains, and units can be issued on multiple networks, as long as investor rights and charges are consistent.

2. Why This Matters For Crypto And Tokenization

By bringing tokenized funds into the mainstream UK regime, the FCA is signaling that tokenization is a structural upgrade to fund plumbing, not a side experiment. That can lower operational costs, speed settlement, and improve transparency in how fund units move.

This sits alongside a broader roadmap from tokenized funds to tokenized assets and cash flows, including digital wallets and smart contracts, while keeping current investor protection standards. The FCA also says it is open to waivers that could allow digital cash or stablecoins for settlement in future, which would link regulated funds more tightly to crypto-native rails.

3. What To Watch Next

The immediate signal will be how many major asset managers launch FCA-compliant tokenized UCITS or other UK funds using this framework, and on which blockchains they choose to maintain registers.

In 2026 the FCA plans further input on broader DLT use in wholesale markets, and the UK is working toward a fuller cryptoasset regime targeted for October 2027, which will shape how far stablecoins and other digital money can be integrated into settlement.

For crypto users, the key question is how quickly these tokenized funds become usable in trading, collateral and DeFi integrations, versus remaining a closed institutional product line.

Conclusion

The FCA has moved tokenized funds from pilot status into the core UK rulebook, giving asset managers a clear path to use DLT while preserving traditional protections. If asset managers now follow through with real issuance and the UK eventually permits digital cash or stablecoin settlement, this could turn tokenized funds into one of the main bridges between traditional finance and onchain markets.