This browser is not actively supported anymore. For the best passle experience, we strongly recommend you upgrade your browser.
List Professionals Alphabetically
A B C D E F G H I J K L M N O P Q R S T U V W X Y Z View All
Search Professionals
Site Search Submit
| 2 minute read

FCA Consults on Fund Tokenisation and Direct Dealing

On 14 October 2025, the Financial Conduct Authority (FCA) published a consultation paper (CP25/28) setting out proposals to advance fund tokenisation through new direct dealing arrangements, and guidance on distributed ledger technology (DLT) implementation for UK authorised funds.

Background

In unit transactions, UK authorised funds currently operate through Authorised Fund Managers (AFMs) acting as principal, as opposed to allowing investors to deal directly with the fund or its depositary. This model, largely unique to the UK, creates an increased administrative burden and heightened regulatory risk that places UK fund managers at a competitive disadvantage to international peers. 

With global tokenised fund assets under management projected to reach $317 billion by 2028, the FCA’s proposals in CP25/28 aim to enhance the competitiveness of the UK as a global hub for asset management. 

Fund Efficiency and Direct Dealing in Authorised Funds 

The FCA proposes allowing investors to transact directly with funds through an Issues and Cancellations Account (IAC), eliminating interim exposure to an AFM and associated client money requirements. This would align UK practice with other fund centres, such as Ireland and Luxembourg.

Key features include:

  • optional implementation across UCITS schemes, non-UCITS retail schemes, Long-Term Asset Funds, and Qualified Investor Schemes;
  • safeguards to maintain segregated liability of sub‑funds when using an IAC;
  • requirements for AFMs to reimburse funds for interest on late payments where discretion is exercised; and
  • estimated net benefits of between £27 million to £57 million over ten years through reduced operational costs. 

Accelerating Tokenisation of Authorised Funds

Building on the first tokenised UK UCITS authorised in January 2025, the FCA provides guidance clarifying how managers can use DLT for fund registers, whether on private or public networks. The guidance addresses:

  • authority to make unilateral register updates through smart contracts or master-node functionality;
  • implementation of eligibility verification systems and “whitelisting” procedures; and
  • compliance with the Money Laundering Regulations. 

Fund Tokenisation Roadmap

CP25/28 sets out a roadmap to support further tokenisation in fund management, including:

  • supporting the use of tokenised money market fund (tMMF) units as collateral in derivatives transactions, with clarification on eligibility under UK EMIR;
  • proposed amendments to COLL permitting funds to hold “ancillary digital assets” for operational purposes; and
  • confirmation that funds can invest in digital securities, including Treasury DIGIT pilot instruments.

Supporting Future Tokenisation Models

Chapter 5 of CP25/28 explores a three-phase model for the evolution of tokenisation:

  • phase 1 – tokenised funds, using DLT for register maintenance and unit settlement;
  • phase 2 – tokenised assets, enabling direct holdings of tokenised assets and managed via smart contracts using “micro-model portfolios”; and  
  • phase 3 – tokenised cash flows, breaking down assets into tokenised cash-flow components to build highly customised investment solutions tailored to individual needs. 

Next Steps

Comments on operational proposals (Chapters 2-4) are due by 21 November 2025, with responses on future tokenisation models (Chapter 5) by 12 December 2025. Final rules are expected in the first half of 2026. 

CP25/28 is available here

Tags

asset management, blockchain, crypto, financial markets and funds, financial regulation, financial regulatory, regulated funds, regulatory