Fund Tokenisation: New FCA Rules And Guidance To Accelerate Progress

The FCA has finalised new rules and guidance as part of its work to progress fund tokenisation in the UK. The new rules and guidance amend the FCA's Collective Investment Schemes sourcebook (COLL) and are set out in a policy statement (PS26/7) published on 30 April 2026. They entered into force with immediate effect.

In our previous blog post, we considered the FCA's consultation proposals in this area, which were set out in CP25/28, published in October 2025. The FCA notes in PS26/7 that respondents "almost universally supported our approach and ambition to accelerate fund tokenisation in the UK".

Final guidance on accelerating tokenisation of authorised funds

The guidance sets out how DLT may be used in the operation and maintenance of the register of an authorised fund, as well as identifying other matters for firms to consider. It is outcomes-focused, illustrative and optional, and designed for both authorised fund managers (AFMs) and depositaries of authorised funds that are using or considering using DLT.

In finalising the guidance, the FCA made changes in certain areas to reflect feedback to CP25/28. We highlight some key aspects of the guidance below:

• On-chain DLT records as primary books and records. An on-chain record of transactions may be considered the primary books and records for unit deals. Provided a firm has appropriate resilience plans in place, it does not need to maintain a full "mirror" off-chain record of this information. The register must be accurate and kept up to date, so where it is recorded on DLT or utilises DLT records, the responsible firm must be able to amend the register without needing third party consent or agreement. In addition, to comply with register inspection requirements under COLL, the guidance states that a firm's systems should combine both on- and off-chain records where compliance cannot be fully achieved on DLT. 
• Multiple blockchains within a share class. The FCA has clarified that units in a given class may be issued on multiple blockchains, provided the underlying rights of unitholders and the nature of charges and expenses that may be taken from scheme property, remain the same within a class.
• Authority of manager over the register. In the light of responses, the guidance now refers to token freeze/unfreeze functionality and forced transfer functionality as means by which a firm may effectively manage unitholder processes, effect decisions of a court, or resolve register management problems. The FCA points out that as the guidance is outcomes-based, firms can comply using other technological means, giving them greater flexibility in selecting appropriate solutions for their target market, product, network choice or situation.
• Managing network risks and outsourcing. Respondents welcomed the FCA's confirmation in CP25/28 that firms can use public DLT networks for fund management, provided they have the appropriate controls in place (including operational resilience). The FCA considers that such use does not constitute outsourcing. (Separately, the FCA intends to consult in Q2 2026 on non-Handbook guidance for firms using public DLT networks, to provide more clarity on their operational resilience implications. It will reflect feedback to CP25/28 in that consultation.)
• Compliance with MLRs. The guidance includes provisions on compliance with the Money Laundering Regulations 2017 (MLRs) and applicable sanctions regimes. The FCA has cut back on its original proposals, having concluded they repeated existing obligations with which firms are familiar. The guidance still refers to firms considering the need for registration under the MLRs, but the FCA draws attention to the future legislative and regulatory regime for cryptoassets. The framework for this has progressed since CP25/28, and, under the new regime, firms carrying out regulated cryptoasset activities – including firms already registered under the MLRs – will require authorisation under the Financial Services and Markets Act 2000 (FSMA). Authorised firms will not need to additionally register under the MLRs to act as a cryptoasset exchange provider or a custodian wallet provider.
• Smart contracts and eligibility verification. The FCA has finalised its guidance in this area as consulted on. Respondents agreed with the FCA's approach to how firms can use technology solutions (including smart contracts and DLT) to perform unitholder processes and support Know Your Customer (KYC) controls. The guidance references the practice of "whitelisting", or having an "allow list", as a way of controlling the transfer of units.
• Depositary oversight. Depositaries that responded to CP25/28 requested additional guidance for their oversight of on-chain activity. The FCA comments that the rules in this area exist independently of fund legal structure and technology, and therefore it has decided not to propose formal guidance at this point in time. Instead, it will work with industry and trade associations to address questions as they arise.
• Additional feedback. Respondents provided feedback on other areas that will influence the uptake of fund tokenisation in the UK, but are largely outside the scope of the guidance as proposed and finalised. These areas are token and network standards; secondary trading; on-chain ID; and the tax implications of some blockchain transactions. In each case (except tax, on which the FCA understands industry and HMRC are engaging), PS26/7 includes a brief response from the FCA. 

Final rules on a new D2F dealing model

The FCA's proposal to introduce D2F as an optional alternative dealing model received strong support for its potential to increase efficiency and consistency with fund operations in other jurisdictions, enabling firms to streamline and simplify them, particularly in the light of upcoming market reforms such as T+1 settlement and tokenisation. 

Accordingly, the FCA's final rules are largely as consulted on in CP25/28, but with certain modifications in the light of feedback. They include rules that:

• Permit principal dealing. The FCA has amended its rules so that they now allow AFMs to deal as principal in units of a fund using D2F, and to use different dealing models within a fund or sub-fund. This change was to address concerns that the prohibition it originally proposed could prevent AFMs from providing liquidity in tokenised funds operating 24/7 secondary market settlement.
• Confirm the IAC as scheme property. Consistent with practice in other fund centres, D2F uses an issues and cancellations account (IAC) to receive and make investor payments.³ The FCA has confirmed that the IAC is scheme property of the relevant fund. 
• Strengthen IAC reconciliation controls. The FCA had proposed that unattributable payments would be transferred to a client money account, but received significant feedback that this would detract and limit adoption of the D2F model. The FCA has therefore decided this would not be the right approach for unattributable sums. Instead, it will apply stronger controls on reconciliations and provide appropriate investor protection. Briefly, the AFM must reconcile any IAC daily, or as often as the fund deals, and any money received into an omnibus account must be allocated promptly and no later than five business days after receipt. If the money remains unattributed after five business days, the AFM must instruct it to be returned to the sender.
• Clarify the position around use of umbrella IACs within the PCL. One of the more complex issues arising in the context of D2F concerns umbrella-level omnibus IAC accounts, which must comply with the UK's protected cell legislation (PCL) that requires assets and liabilities of sub-funds in umbrella schemes to be ringfenced. Respondents commented that, if an attribution basis were not permitted, many firms would be unable to operate an omnibus account within the PCL, which would in turn significantly limit uptake of the new D2F model. Views differed on the FCA's interpretation of the PCL as set out in CP25/28 and the FCA is exploring options with HM Treasury on how to accommodate broader use of D2F – it suggests that it may be necessary to amend the OEIC Regulations and FSMA to provide a clearer legal basis for D2F that is consistent with the PCL. As an interim step, the FCA has amended its rules to more closely reflect the PCL and minimise conflicts/overlapping terms, and to state that, where an AFM proposes to use an omnibus IAC, it must ensure it has received legal advice that the intended operation of the omnibus IAC is in accordance with the PCL. The FCA has also added guidance on the factors to which AFMs should give careful consideration as part of an assessment of whether the omnibus IAC can at all times be operated in compliance with the PCL.

Looking ahead: near-term and further into the future

The areas the FCA identified in the discussion chapters of CP25/28 concerned potential barriers to the uptake of tokenised funds in the near-term and actions to tackle these, together with questions designed to draw out industry views on longer-term ambitions and future tokenisation models.

We briefly summarise below some of the key points that emerged from this discussion:

• Collateral mobility. The FCA is working with the Bank of England, HM Treasury and industry, through the government's Wholesale Financial Markets Digital Strategy, to support the use of tokenised assets, particularly tokenised money market funds (tMMFs), as collateral for uncleared trades.
• Use of stablecoins to settle unit deals. The FCA supports the development of on-chain cash instruments and fully on-chain funds in the UK. It does not plan at the current time to restrict stablecoins to UK-issued products. The FCA agrees that some funds might require use of stablecoins for a broader range of operational (i.e. non-investment) purposes and is open to firm-specific waiver/modification applications – firms can use the template provided in CP25/28 as a baseline to support such applications. Regarding investor protection, the FCA refers to its rules, including the Consumer Duty, and states that disclosures around the use of stablecoins for settlement should be proportionate, targeted and focused on outcomes.
• Composability. The FCA describes composability as "breaking down products/services and technological processes into modular components" and it explored, in CP25/28, a three-stage process that many firms agree will happen in the future to progress tokenisation (the FCA does not itself endorse any specific composable finance vision). In PS26/7, the FCA reports that respondents generally supported the direction set out in the process. Many respondents called on industry groups to focus on areas offering the most operational efficiency gains, including dealing, fund events, and eligibility and onboarding. Respondents were divided on the future approach the FCA could take to regulation in a composable finance end-state, but there was agreement that the FCA's current funds framework is sufficient to allow firms to start to experiment with tokenised portfolio management concepts. The FCA also adds that composability is a potential component of its planned work, under its digital assets roadmap, on a vision for the adoption of DLT by UK wholesale capital markets.

Next steps

PS26/7 is a tangible and substantive step forward. The guidance came into force with immediate effect and firms seeking to launch tokenised authorised funds should consider it.

D2F has the potential to bring the UK into line with dealing practices in other major fund jurisdictions. The rules (which also came into force with immediate effect) are optional and firms will need to decide whether and when they might adopt the D2F model in respect of new or existing funds. Where relevant, firms should in particular note the point around umbrella IACs and the PCL, which we discuss above, and take appropriate legal advice on this.

Finally, and more generally, there is active encouragement from the FCA for firms exploring tokenised portfolio management and composable finance to make use of its "open-door policy" and also (where appropriate) its Innovation Services, which offer support to firms seeking to develop use cases. 

Please contact us if you would like to discuss this or other recent UK cryptoasset policy developments, which we are tracking. Our latest blog posts are:

• A blog post summarising HM Treasury's proposed amendments to the Cryptoasset Regulations in relation to UK-issued qualifying stablecoin.
• A blog post considering the FCA's consultation on proposed perimeter guidance on cryptoasset activities (CP26/13). 
• A blog post outlining the current policy position and practical actions for firms to prepare for the FCA authorisation process.

Footnotes

1. The Blueprint model was developed by the industry-led Technology Working Group of the previous government's Asset Management Taskforce. It sets out how firms can operate a tokenised unitholder register within existing legal and regulatory frameworks.

2. Under D2F, unitholder deals are effected through direct issue and cancellation of units in the fund, in exchange for settlement of cash directly between investors and the fund – different from the typical dealing model under which the fund manager deals as principal in unit transactions with investors.

3. The IAC is a bank account held by, or for or on behalf of, an authorised fund or a sub-fund, the purpose of which is to receive money for the issue of units and to pay out money for the cancellation of units.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.