Executive Summary
The UK Financial Conduct Authority has given the green light to a set of rules that let investment funds keep their registers on a blockchain and trade directly with investors through a Direct‑to‑Fund model. The move is designed to simplify the creation and operation of tokenised funds while keeping them firmly inside the current regulatory regime. By approving these changes this week, the FCA removes the need for fresh legislation and opens a clear, compliant route for funds to embrace on‑chain technology.
What Happened
The FCA announced that it has formally approved two key regulatory updates. First, UK investment funds may now maintain their official registers on a blockchain, allowing for immutable, transparent record‑keeping that is accessible to authorized parties. Second, the regulator introduced a Direct‑to‑Fund dealing model, which enables investors to trade directly with the fund itself, bypassing traditional intermediaries such as broker‑dealers or platforms.
Both updates were rolled out under the existing UK financial regulatory framework, meaning that tokenised funds can operate without waiting for a separate legislative package. The FCA’s decision clears the regulatory pathway for funds that wish to adopt token‑based structures, ensuring they remain subject to the same oversight and consumer protections as conventional vehicles.
Background / Context
Tokenisation has been gaining traction across the financial sector as a way to increase efficiency, reduce costs, and improve accessibility. Yet, until now, the lack of clear regulatory guidance in the UK has slowed adoption among traditional fund managers. Existing rules required funds to keep registers in off‑chain systems, creating friction when trying to leverage blockchain’s benefits.
The FCA’s new approach aligns with broader global trends where regulators are seeking ways to accommodate innovative financial products without compromising investor safety. By allowing on‑chain registers, the FCA acknowledges that immutable ledgers can enhance auditability and reduce the risk of errors or fraud.
Reactions
Industry participants have welcomed the FCA’s decision as a decisive step toward modernising fund administration. Asset managers that have been exploring tokenised structures said the approval removes a major uncertainty and paves the way for pilot projects and full‑scale rollouts.
Regulatory observers noted that the FCA’s willingness to adapt existing rules rather than draft new legislation demonstrates a pragmatic stance. The move is expected to encourage other jurisdictions to consider similar pathways, potentially harmonising global standards for tokenised assets.
What It Means
For fund managers, the ability to keep registers on a blockchain means faster onboarding of investors, real‑time updates to ownership records, and reduced reliance on paper‑based processes. The Direct‑to‑Fund model also cuts out middlemen, which could lower transaction costs and shorten settlement times.
Investors stand to benefit from greater transparency and the assurance that their holdings are recorded on an immutable ledger. Because the funds remain under the FCA’s oversight, existing consumer protection mechanisms continue to apply, mitigating concerns about regulatory arbitrage.
Overall, the regulatory changes could accelerate the integration of blockchain technology into mainstream finance, positioning the UK as a leading hub for compliant tokenised fund offerings.
What Happens Next
Fund managers are expected to begin the process of migrating their registers to approved blockchain solutions over the coming months. The FCA has indicated that it will monitor early implementations closely, gathering data to refine guidance as the market evolves.
Stakeholders anticipate that the Direct‑to‑Fund model will be rolled out in phases, starting with a limited set of eligible funds before expanding to a broader range of asset classes. Ongoing dialogue between the FCA, industry bodies, and technology providers will shape the practical rollout and address any operational challenges that arise.