Has the UK Financial Conduct Authority (FCA) issued new rules and guidance aimed at making it easier to integrate blockchain technology into traditional asset management governance structures? In a policy statement issued on Thursday, titled PS26/7, the FCA set out how tokenized funds can be included within the existing regulatory framework for funds, moving beyond experimental regimes and allowing blockchain to operate under accepted market standards. These changes represent an important step toward modernizing the financial infrastructure and improving the efficiency of fund management. Tokenization technology and distributed ledger technology (DLT) have the potential to revolutionize the sector by simplifying record-keeping and enhancing transparency. The FCA also stated its commitment to supporting innovation in the UK asset management sector, making it easier for firms to integrate blockchain into their operations without giving up investor protection standards. This direction forms part of a wider initiative detailed in the UK’s Digital Assets Roadmap, first presented in a letter to the Prime Minister in January 2025.

How does this affect asset managers and tokenized funds? Under the new framework, firms are now allowed to run investor records on distributed ledger technology (DLT) systems, using the standard “scheme” model in the industry. This enables the use of transaction records on the blockchain as the primary records for unit transactions without the need for a duplicate copy outside the blockchain, provided firms apply “appropriate flexibility plans.” The scheme has already been used successfully to license the UK’s first tokenized collective investment scheme in transferable securities (UCITS), a foundational structure for mutual funds. Most importantly, licensed funds will now be able to keep their records on public distributed ledger technology networks, as long as they meet the FCA’s required standards for security and transparency. This means funds can issue units across multiple blockchains while maintaining investors’ rights and consistent fee structures. This was stated by Simon Wool, Executive Director of Markets at the FCA.