Key Takeaways
- • The UK Financial Conduct Authority (FCA) has approved new rules allowing tokenized funds to operate within the existing authorized fund regime, eliminating the need for separate experimental structures and providing asset managers with a clear regulatory pathway for on-chain fund operations.
- • Under Policy Statement PS26/7, authorized funds (including UCITS) can now maintain unitholder registers on distributed ledger technology using the industry "Blueprint" model, with on-chain transaction records serving as primary books without requiring full off-chain duplicates if operational resilience plans are in place.
- • The FCA introduced an optional Direct-to-Fund (D2F) dealing model that streamlines subscription and redemption processing while maintaining existing investor protection standards, allowing units to be recorded across multiple blockchains as long as investor rights and charge structures remain unchanged.
- • The regulator is preparing for deeper tokenization including tokenized assets and cash, with potential stablecoin authorization for fund transactions ahead of a broader cryptoasset regulatory framework expected by October 2027.
- • The approval represents a significant regulatory shift toward blockchain integration for institutional asset managers while maintaining governance, data privacy, and financial crime controls on public DLT networks.
Summary
The UK Financial Conduct Authority has taken a landmark step in crypto market development by approving new rules that permit tokenized funds to operate within the existing authorized fund framework rather than within isolated experimental structures. Published in Policy Statement PS26/7, these changes establish a regulatory pathway for asset managers to migrate fund operations to blockchain technology while preserving investor protections and maintaining compliance with current standards.
The core of the new framework centers on the adoption of the industry "Blueprint" model for on-chain fund registers. Under these guidelines, authorized funds—encompassing UCITS and other regulated fund structures—can now maintain unitholder registers on distributed ledger technology. Critically, on-chain transaction records may serve as the primary books and records for unit dealings, and firms are no longer required to maintain complete off-chain duplicates provided they sustain appropriate operational resilience plans. This represents a fundamental shift in regulatory acceptance of blockchain as a primary infrastructure layer rather than a supplementary tool.
The FCA's approval extends to registers operating on public DLT networks, contingent upon firms meeting the regulator's expectations for governance, data privacy, and financial crime controls. The framework permits units within a single share class to be recorded across multiple blockchains simultaneously, provided investor rights and the structure of charges remain consistent across all networks. This flexibility enables asset managers to leverage multiple blockchain platforms while maintaining a unified fund structure and investor experience.
A central element of the regulatory update is the introduction of an optional Direct-to-Fund (D2F) dealing model, which fundamentally alters how fund subscriptions and redemptions are processed. This model facilitates more efficient on-chain transactions and reduces intermediary layers in the fund dealing process. The FCA has indicated that it is preparing for deeper tokenization initiatives, potentially including tokenized assets and cash settlement, with possible authorization of stablecoins for fund transactions before the broader cryptoasset regulatory regime takes effect in October 2027.
These developments signal the FCA's strategic positioning toward institutional adoption of blockchain infrastructure within the traditional fund management ecosystem. By integrating tokenization capabilities into the existing regulatory framework rather than creating parallel structures, the regulator has lowered barriers to adoption for established asset managers while maintaining supervisory oversight and investor safeguards.
The core of the new framework centers on the adoption of the industry "Blueprint" model for on-chain fund registers. Under these guidelines, authorized funds—encompassing UCITS and other regulated fund structures—can now maintain unitholder registers on distributed ledger technology. Critically, on-chain transaction records may serve as the primary books and records for unit dealings, and firms are no longer required to maintain complete off-chain duplicates provided they sustain appropriate operational resilience plans. This represents a fundamental shift in regulatory acceptance of blockchain as a primary infrastructure layer rather than a supplementary tool.
The FCA's approval extends to registers operating on public DLT networks, contingent upon firms meeting the regulator's expectations for governance, data privacy, and financial crime controls. The framework permits units within a single share class to be recorded across multiple blockchains simultaneously, provided investor rights and the structure of charges remain consistent across all networks. This flexibility enables asset managers to leverage multiple blockchain platforms while maintaining a unified fund structure and investor experience.
A central element of the regulatory update is the introduction of an optional Direct-to-Fund (D2F) dealing model, which fundamentally alters how fund subscriptions and redemptions are processed. This model facilitates more efficient on-chain transactions and reduces intermediary layers in the fund dealing process. The FCA has indicated that it is preparing for deeper tokenization initiatives, potentially including tokenized assets and cash settlement, with possible authorization of stablecoins for fund transactions before the broader cryptoasset regulatory regime takes effect in October 2027.
These developments signal the FCA's strategic positioning toward institutional adoption of blockchain infrastructure within the traditional fund management ecosystem. By integrating tokenization capabilities into the existing regulatory framework rather than creating parallel structures, the regulator has lowered barriers to adoption for established asset managers while maintaining supervisory oversight and investor safeguards.
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