Final guidance on fund tokenisation

May 2026

In April 2026, the FCA published policy statement PS26/7, outlining its final guidance and rules for fund tokenisation and direct fund dealing in the UK. This follows on from feedback received on consultation paper CP25/28.

The policy statement reflects the regulator's commitment to supporting innovation and the uptake of tokenisation within the UK asset management sector, to some extent helping the UK catch up to other leading jurisdictions around the world.

At a glance

Guidance for tokenising authorised funds

The final guidance should provide useful clarity for fund managers who are considering tokenisation but needed further comfort on the FCA’s expectations.
A new direct fund dealing model

New rules will enable investors to transact fund units directly with the fund or depositary rather than the principal dealing model in which Authorised Fund Manager (AFM) acts as principal in unit deals. This creates an optional alternative to today’s approach where investors deal with the fund manager who subsequently deals with the fund. This brings the UK into line with other fund jurisdictions and aims to enhance fund efficiency and facilitate integration with tokenisation models.
Wider FCA clarifications
- Digital assets: Firms may use digital cash and money-like instruments for operational purposes within authorised funds, facilitating on-chain activities, particularly transaction settlement involving cryptoassets.
- Tokenised Money Market Funds (tMMF): Firms may use tMMF units as collateral provided they meet current UK EMIR requirements.
- Use of public Distrtibuted Ledger Technology (DLT) networks: Firms can utilise public DLT networks in fund management operations, but will need to implement robust controls and ensure compliance with resilience, data privacy and anti money laundering (AML) requirements.

In more detail

Final guidance on tokenising funds

New guidance has been added to COLL (the rulebook for authorised fund managers) to support managers with launching tokenised funds. In principle, the use of DLT is permitted but authorised fund managers (AFMs) and depositaries need to ensure its use is consistent with existing requirements in COLL. The guidance aims to help firms in this context. Some of the most important areas of focus include:

Record keeping approach

An on-chain DLT record can be the primary record for the unitholder register, but the AFM needs the power and ability to make changes without the consent of third parties. Helpfully, in a departure from the consultation, the FCA has clarified it is not necessary to also mirror the record off chain. In addition, the FCA has clarified that units of a given share class may be issued on multiple blockchains as long as the underlying rights of investors and fees/charges remain the same.
Smart contracts

Where smart contracts are used, firms should consider whether additional technology controls are required to ensure that unit transfers are between eligible unitholders. Smart contracts should be regularly audited when they support certain important functions to ensure they meet evolving industry standards.
Unit aggregation

AFMs should ensure that systems are able to aggregate unitholder ownership across different wallets and blockchains.
Network risks and outsourcing

The FCA reminds firms of existing requirements and notes they should consider DLT network outages in risk management policies and procedures, and have alternative processes to allow for unit transactions in the event of an outage.
Public or consortium-based DLT networks

Public networks may be used, but where networks are overseas or the location of the activity may be uncertain, AFMs need to consider this could affect the fund’s domicile.
AML

Firms may need to be registered as a cryptoasset exchange provider or custodian wallet provider under the Money Laundering Regulations (MLRs) where they carry on an activity which requires registration. However, once new cryptoasset regulations come into force in October 2027, which amends the MLRs, firms will be able to operate a register maintained on DLT without the additional MLR registration, or new cryptoasset activity permissions.
Personal data

Firms need to comply with data protection legislation, especially where public networks are used and information is not secured through encryption by default. The FCA sets out factors firms need to consider, including the impact of emerging technology such as quantum computing, and around whether disclosed information allows trading strategies to be identified.

Direct to fund dealing (D2F)

New rules and guidance create a new optional direct dealing model for authorised funds. Rather than needing the AFM to act as an intermediary between investors and the fund, it would allow the fund or its depositary to act as the principal in unit deals with investors. This model is common in other jurisdictions and applies to non-tokenised funds as well as tokenised ones.

This could be beneficial as it means subscriptions and redemptions can be executed through a single transaction, potentially allowing firms to simplify aspects of their fund operations.

Key to the model is the newly introduced Issues and Cancellations Account (IAC). This is a bank account that would be used to receive and make payments to investors.

Firms will want to consider converting existing funds to direct dealing models or launching new funds that use this approach. However, they will need to navigate the following challenges when doing so:

AML responsibilities regarding investors

Firms will need to ensure that the fund’s documents specify which party is responsible for AML and will carry out this activity
Managing ‘omnibus’ IAC accounts at umbrella fund level

If firms decide to operate such an account (i.e. across multiple sub-funds), they will need to comply with the FCA’s new rules as well as existing UK legislation that governs the ownership of assets in the OEIC regulations and FSMA – the protected cell legislation (PCL). Given current uncertainty around the interpretation of the PCL in this specific context, firms will likely need to use individual sub-fund IACs rather than omnibus accounts while the industry and authorities consider whether amendments to the OEIC regulations and FSMA are needed.
Pricing the IAC and spread of risk

Firms will need to ensure they implement processes to ensure compliance with the FCA’s position on the treatment of cash in the IAC, performing daily reconciliations of the IAC (or as often as the fund deals), and the management of late payments.
Disclosures and investor notification

The FCA considers that some changes to disclosures such as updating the prospectus would be needed. It has confirmed that operating an IAC would be a ‘notifiable’ change under COLL 4.3 – so AFMs will need to work through the usual process in that respect.

The use of digital assets for non-investment purposes

In the consultation, the FCA asked various questions around the use of digital assets in the settlement process. It has provided the following clarifications in the policy statement:

Funds’ use of cryptoassets for non-investment purposes

The FCA clarifies that firms may apply for waivers to use cryptoassets for certain operational, non-investment purposes. This means funds may hold digital cash and money-like instruments to support certain use-cases such as settling unit deals, maintaining the fund register, paying gas fees (to those that operate distributed ledgers), processing eligible payments, and settling eligible underlying investments. The FCA does not plan to restrict the use of stablecoins to UK-issued products at this time, but will monitor market developments.
Authorised funds investing in cryptoassets

The FCA’s position continues to be that authorised funds may not hold cryptoassets for investment purposes. It plans to conduct a future, broader review of the eligible assets regime for authorised funds. But it does not see any regulatory barriers preventing UK authorised funds from investing in tokenised forms of eligible assets.
Fund managers’ and depositaries’ permissions

The FCA recaps that UK-authorised fund managers and depositaries are exempt from certain other activities under the Regulated Activities Order when carrying those activities out with the purpose of managing or safeguarding the fund. So broadly speaking, the FCA clarifies that managers and depositaries would not need new cryptoasset-related permissions for safeguarding cryptoassets in this context. CASS 17, which outlines safeguarding rules for cryptoassets, is expected to apply to depositaries when safeguarding qualifying cryptoassets and specified investment cryptoassets, in line with how CASS 6 applies to UCITS and AIF depositaries.

Tokenised Money Market Funds (tMMFs)

tMMFs could be a highly liquid and efficient form of collateral, thereby reducing reliance on traditional cash buffers and enhancing treasury management for firms. The FCA views tMMFs as a potential gateway for broader tokenisation within the financial ecosystem.

The policy statement reiterates the FCA’s confirmation that (tMMFs) are eligible as collateral for uncleared UK European Markets Infrastructure Regulation (UK EMIR) trades as long as they meet existing rules under UK EMIR.

However, the policy statement also acknowledges that the existing collateral rules exclude the most widely-used MMFs. The FCA is taking forward industry’s request to consider technical fixes in collaboration with the Bank of England and HM Treasury – but noted that any extension of eligible MMF categories must be within an acceptable risk tolerance and must ensure that collateral remains safe, liquid and accessible during market events.

A look to the future

The new rules and guidance on progressing fund tokenisation entered force on 30 April 2026. The FCA plans to continue engaging with stakeholders on the broader DLT roadmap for wholesale capital markets in late 2026 and will progress the composable finance framework. Further discussions on cryptoasset regulations, including issuing qualifying stablecoins and other activities, are ongoing, with responses to Consultation Paper 26/13 expected by 3 June 2026.

Actions for Firms

This Policy Statement is significant for firms as it aims to foster more efficient fund management and enhance the competitiveness of UK firms by streamlining operational processes. Firms should:

Develop a firmwide tokenisation strategy by reviewing the new FCA rules on tokenised fund registers and direct dealing, and identifying where they create operational, product and competitive opportunities.
Assess whether to launch or convert funds into the direct dealing model, with a clear implementation plan covering AML responsibilities, Issues and Cancellations Accounts, reconciliations and investor disclosures.
Strengthen governance, controls and technology for DLT-based operations, including register design, smart contract assurance, outage planning, wallet aggregation, data protection and third-party oversight.