FCA clears UK funds to use blockchain, on-chain registers

The Financial Conduct Authority published policy statement PS26/7 on Thursday, allowing authorized UK funds to use distributed ledger technology and maintain investor registers on-chain under the existing fund rules. The statement introduces an optional Direct-to-Fund dealing model and formal guidance on the industry Blueprint for on-chain investor records.

PS26/7 sets out how tokenized undertakings for collective investment in transferable securities (UCITS) and other authorized funds can operate with DLT while maintaining investor protections. The guidance forms part of a digital assets roadmap the FCA linked to a January 2025 letter to the prime minister.

Under the Blueprint model, firms may run investor registers and transaction records on-chain. The FCA confirmed that on-chain transaction records can serve as the primary books for unit deals without a full off-chain duplicate if firms put in place appropriate resiliency plans and controls. The regulator noted the Blueprint has already been used to authorize the first tokenized UK UCITS and that authorized funds may keep registers on public DLT networks when controls meet FCA standards.

The main regulatory change is the optional Direct-to-Fund (D2F) dealing model. Under D2F, the fund or its depositary, rather than the manager, becomes the counterparty to investor trades. Transactions are completed in one step, with units issued or canceled directly against cash moving between investors and the fund. Funds may issue units across multiple blockchains provided investor rights, charges and records remain consistent.

Simon Walls, executive director of markets at the FCA, described the guidance as a practical framework intended to give firms clarity on how fund tokenization can operate within the FCA’s rules.

The statement outlines a longer-term roadmap toward tokenized assets and tokenized cash flows, including scenarios where investors hold tokenized assets in digital wallets and managers use smart contracts to automate functions. The FCA said it will consider waivers to allow funds to use digital cash and stablecoins for settlement and certain expenses and plans to seek further views in 2026 on wider DLT use in wholesale markets.

The guidance is part of a wider regulatory agenda on cryptoassets. The FCA opened a consultation this month on guidance for stablecoin issuance, trading, custody and staking as it prepares a full cryptoasset framework scheduled to take effect in October 2027. The regulator noted that existing investor protection requirements and custody standards will continue to apply when firms adopt tokenization.

The policy clarifies regulatory expectations for resilience, recordkeeping and investor rights when funds use distributed ledger technology.