A deeper dive on fund tokenisation in the UK

Ahead of the 21 November 2025 deadline in connection the FCA’s consultation on fund tokenisation, we take a look at the consultation in more detail and implications for firms.

The consultation is a key step on the path to unlocking fund tokenisation in the UK. Its aim is to provide further clarity to authorised fund managers looking to operate a tokenised model under the current regulatory framework and consult more broadly on the future of fund tokenisation. 

Fund tokenisation today 

The concept of fund tokenisation today involves the register of unitholders of the fund being maintained on distributed ledger technology (DLT). With these “on-chain” registers being maintained on decentralised networks, they can be updated in real time and allow the relevant parties to access accurate and synchronised data directly, potentially reducing the need for manual reconciliations between intermediaries, streamlining settlement processes, and enhancing auditability. 

Importantly, the FCA’s guidance confirms that, in their view, this model of fund tokenisation is compatible with its current rules. However, it acknowledges that fund managers, depositaries, and other intermediaries may require additional guidance in order to navigate specific regulatory challenges relevant to the use of DLT-based solutions. 

FCA Handbook clarifications and proposed amendments

To support the adoption of this model of fund tokenisation, the FCA proposes to insert new guidance into its Collective Investment Scheme sourcebook. The guidance is designed to assist authorised fund managers and depositaries in using DLT to operate and maintain fund registers, while preserving investor protections and regulatory oversight. Key considerations include:

• Ability to make changes to the register: The proposed guidance makes clear that the authorised fund manager or other responsible firm must be able to amend the register as necessary without requiring the consent or agreement of any third party. Recognising that this right may not exist automatically, the guidance considers the use of private keys, ‘master-node’ functionality and contractual frameworks to help facilitate this requirement.
• Hybrid records: Regulations require the register of unitholders to be reproduced in legible form, in the UK and to be accessible to the depositary, regulator and unitholders. The guidance clarifies that firms can use systems combining on- and off-chain records to achieve this where it cannot be achieved fully on-chain.
• Smart contracts and eligibility verification: Using DLT may enable unitholders to transfer units between themselves or to third parties. The guidance recognises this possibility and the risks associated with it (for example, that the register may be incomplete, or that a unit may be transferred to an ineligible person). The guidance contemplates the use of smart contracts to mitigate these risks, effectively enabling unitholder addresses to be “whitelisted” to control the flow of tokenised units.

The proposed guidance also covers several other topics, including: 

• compliance with anti-money laundering regulations, with a particular focus on the potential need to register under the regime applicable to cryptoasset service providers;
• the use of public DLT networks, which the FCA notes will require careful consideration of operational resilience and data privacy risks;
• maintaining rights of inspection; and
• the management of network risks, with particular considerations around preserving operational resilience in the context of a network outage.

While the proposed guidance is helpful, there are still areas of uncertainty that remain, and firms will no doubt be keeping a keen eye on any future policy statements for further clarity.

The future of fund tokenisation

The FCA recognises in the consultation the prospect of a three-stage implementation of fund tokenisation, culminating in “fully on-chain” funds. This would require: 

1. tokenisation of fund units and registers;
2. tokenisation of underlying assets, such as tokenised bonds or gilts; and
3. tokenisation of cash flows, which could enable highly personalised portfolio management at scale.

Helpfully, the FCA has confirmed that the investment and borrowing rules in COLL do not impose any regulatory barriers to prevent UK authorised funds from investing in tokenised forms of eligible assets.

The consultation contains a number of questions to market participants, seeking views on the potential risks associated with each subsequent stage of implementation and the role the FCA can play in facilitating this implementation. 

Direct to Fund

The consultation also proposes a new optional ‘Direct to Fund’ (D2F) dealing model, allowing investors to transact directly with the fund or its depositary, rather than through the authorised fund manager.

Next steps

Responses to the consultation are invited by 21 November 2025 for the main proposals and 12 December 2025 for the discussion chapter on future models. The FCA is particularly interested in feedback from both industry and consumer groups, especially regarding future models. A Policy Statement is expected in the first half of 2026.

How we can help

Our team has extensive experience advising on all aspects of the authorised funds landscape so please don’t hesitate to get in touch with a member of the team to discuss how we can assist.

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Written by Brandon Wong and Jamie Howarth

Tokenisation is emerging as a key driver of future financial services. We want to give firms more clarity and confidence to adopt tokenisation in fund management, and make sure our rules are fit for the future.

https://www.fca.org.uk/publications/consultation-papers/cp25-28-progressing-fund-tokenisation