The FCA Opens the Door to Tokenised Fund and Asset Management Models

Innovation is driving change and competition in financial services. The Financial Conduct Authority (FCA) is laying a new regulatory foundation for the new age of financial services by focusing on tokenised funds. In its recently published Consultation Paper, CP 25/28: Progressing Fund Tokenisation, the FCA is sending a message that it is time to modernise and clarify the rules for the future of tokenisation.

What is Tokenisation?

Tokenisation is a method of representing ownership of an asset using Distributed Ledger Technology (DLT). This model is increasingly being adopted, as creating digital versions of fund ownership enables asset managers to benefit from faster settlement, reduced operational friction and enhanced product innovation.

The FCA aims to enable a future-ready tokenisation ecosystem, where technology and innovation are embraced in a controlled and compliant manner. These developments are designed to help maintain the UK’s position as a global hub for asset management, encourage competition, enhance consumer choice and bring more investors into regulated fund environments.

The FCA’s Proposal

Guidance for Tokenised Fund Registers
- The FCA proposes formal guidance for operating token registers under its “Blueprint Model”, which has been developed by participants from the asset management industry;
- The proposal incudes how to manage token minting and burning, unilateral register updates, and the compatibility with existing regulations like the Collective Investment Schemes Sourcebook (COLL) and the Open-Ended Investment Companies Regulations 2001 (OEIC);
- They also consider using public blockchains, in addition to private blockchains, if firms can meet regulatory outcomes.

New “Direct-to-Fund” (D2F) Dealing Model
- The proposal will allow retail investors to trade units directly with the fund or depositary, bypassing the traditional intermediary role of the asset fund manager;
- The D2F dealing model could reduce operational costs, simplify cash handling and potentially avoid certain client money safeguards for asset managers.

Tokenisation Roadmap
- The FCA lays out a phased roadmap for broader tokenisation adoption. Phase 1 will focus on register tokenisation, Phase 2 considered tokenised underlying assets and Phase 3 explores tokenised cash flows;
- They also consider expansion of tokenisation including the role of tokenised Money Market Funds (tMMFs), stablecoins and on-chain settlement through digital currencies or programmable tokens.

Future Tokenisation Models
- The FCA invited input from relevant firms on how future regulation should support more advanced tokenisation models;
- They urge respondents to consider tokenisation applications including on-chain portfolio management, where smart contracts automate strategies and investor actions, compliance embedded tokens, digital identity and more sophisticated DLT governance frameworks.

An Industry Shift

These proposals are more than a technical update, they represent a significant shift in how the FCA envisions the future of asset management:

Operational Efficiency: Tokenised registers and the D2F model aim to accelerate processes, reduce reconciliation requirements and support real-time record keeping.
Cost Optimisation: Tokenisation could reduce fund management costs by automating functions currently handled manually.
Market Innovation: The use of digital instruments enables funds to create innovative products with flexible structures that appeal to new investor demographics.
A Digitally Native Future: The FCA’s roadmap anticipates end-to-end on-chain operations, from tokenised portfolios to digital cash use, encouraging firms to act now to prepare.

Legislative Approach

The FCA plans to adapt the current UK regulatory framework for authorised funds to accommodate tokenisation, rather than introducing new legislation. This approach is expected to create a smoother, more manageable transition for the industry.

What the FCA Expects from Industry

Rather than issuing prescriptive instructions, the FCA identifies areas where industry engagement is essential in shaping the final rules.

The consultation is particularly relevant to Undertakings for Collective Investment in Transferable Securities (UCITS) management companies, UK Alternative Investment Fund Managers (AIFM) and authorised fund depositories. Additional firms that may be relevant to assessing how tokenisation could be operationalised within existing fund structures should also consider participating.

The FCA is seeking industry perspectives on the appropriateness of public vs private blockchain networks, the operational resilience of DLT systems, smart contract usage for minting and burning and how tokenised registers could interact with existing documentation requirements.

Specifically, for the D2F model, feedback on the impacts to liquidity management, cash-flow processes, client-money treatment and traditional AFM responsibilities is desired.

How can Complyport Help

At Complyport, we understand that the FCA’s proposals for fund tokenisation signal a major shift in regulatory expectations, operating models and technological readiness. As your firm prepares for the tokenised fund environment and navigates CP25/28, our regulatory experts are ready to assist through a suite of tailored services:

Regulatory Gap Analysis: Assess how your existing fund governance, COLL processes and operational arrangements align with the FCA’s proposed framework including tokenised registers, the D2F model, and future tokenisation phases, to identify remediations needed to remain complaint.
Policy and Documentation Development: Support firms in updating or drafting policies to ensure they reflect tokenised register operations, on-chain processes and the FCA’s evolving expectations.
Regulatory Readiness Assessments: Evaluate whether your firm’s infrastructure, providers and operational workflows are capable of supporting DLT-based registered, smart contract functionality, and associated operational resilience expectations from the FCA.
Ongoing Regulatory Monitoring: Provide continuous horizon scanning, regulatory updates and hands-on implementation support to ensure our firm remains aligned with the upcoming wave of digital fund regulation.