The United Kingdom’s financial regulator approved new rules for tokenized funds, allowing asset managers to integrate blockchain into existing fund structures. The framework aims to improve efficiency while preserving investor protections under the current regulatory system.
The Financial Conduct Authority (FCA) introduced the changes through policy statement PS26/7. The regulator said distributed ledger technology can improve fund management processes. It also confirmed support for innovation within the UK asset management sector.
Also Read: Crypto Crackdown Intensifies as UK Targets Illegal Trading Networks
FCA Sets Clear Path for Tokenized Funds Adoption
The new structure provides companies with a clear direction to embrace blockchain in the controlled fund activities. The goal of the policymakers is to modernize infrastructure without constructing a parallel system. The strategy retains tokenized funds within the current regulatory boundary.
According to Simon Walls, tokenization will be significant in the management of assets. He said that the regulator has offered a feasible framework to firms. The guidance provides an insight into the manner in which tokenized funds could work under the FCA regulations.
PS26/7 enables companies to keep the records about investors in distributed ledger networks in the form of the Blueprint model. Unit deals can be the primary books in on-chain transaction records. With resiliency plans, firms do not require complete off-chain backups.
The FCA asserted that tokenized UK UCITS funds are already being authorized through the Blueprint model. Registers can be kept on public blockchain networks using authorized funds. They can also issue units across multiple blockchains if investor rights and charges remain consistent.
Direct-to-Fund Model Streamlines Trades
One of the major rule adjustments is the introduction of the optional Direct-to-Fund dealing model. With this design, investor trades are counterparted by the fund or its depository. This substitutes the asset manager in the flow of transactions.
Deals are made in one step where units are issued or canceled against cash movements. This structure, according to FCA, enhances operational efficiency. It also fits better with on-chain settlement processes of tokenized funds.
The regulator presented a framework of the additional development of tokenized funds. The plan evolves towards tokenized assets and then tokenized cash flows. It encompasses the models in which investors store assets in digital wallets.
Smart contracts can be used in future systems to handle fund operations. The FCA stated that it is willing to provide waivers for the use of digital cash and stablecoins. These would cover settlement and some operating costs.
The policy is based on a recent consultation of the broader crypto asset regime. This framework includes stablecoins, trading, custody, and staking. A complete regulatory framework will come into effect in October 2027.
Also Read: Shinhan Card Partners With Solana Foundation to Launch Stablecoin Payment
