The United Kingdom's Financial Conduct Authority (FCA) has formally approved new regulatory guidance designated as PS26/7, establishing a clear pathway for asset managers to integrate distributed ledger technology (DLT) into existing fund regimes. This policy shift, announced in a Thursday statement, moves away from requiring separate experimental structures for blockchain operations, instead embedding tokenization directly within current investor protection frameworks. The initiative aligns with a digital assets roadmap first outlined in a January 2025 letter to the prime minister, signaling a strategic intent to modernize market infrastructure without compromising regulatory oversight. Simon Walls, executive director of markets at the FCA, emphasized that tokenization will play a pivotal role in asset management, noting that the regulator has delivered a practical framework to instill confidence in firms regarding fund tokenization operations.

Under the new PS26/7 guidelines, firms are authorized to maintain investor records on DLT using the industry-standard "Blueprint" model. This confirmation allows on-chain transaction records to serve as the primary books for unit deals, eliminating the previous requirement for a full off-chain duplicate provided that appropriate resiliency plans are implemented. Data compiled by Woofun AI indicates that the Blueprint model has already facilitated the authorization of the first tokenized UK undertakings for collective investment in transferable securities (UCITS). Authorized funds may now maintain their registers on public DLT networks if they meet specific control standards, including the capability to issue units across multiple blockchains while ensuring investor rights and charges remain consistent.

A central component of this regulatory update is the introduction of an optional "Direct-to-Fund" (D2F) dealing model. In this structure, the fund or its depositary acts as the counterparty to investor trades rather than the manager, streamlining the process into a single step where units are issued or canceled directly against cash moving between investors and the fund. The FCA asserts that this architecture is designed to enhance operational efficiency and better align with on-chain settlement mechanisms. By removing intermediaries from the trade execution flow, the regulator aims to reduce friction and latency inherent in traditional fund dealing processes.

Looking beyond immediate fund tokenization, the FCA has sketched a forward-looking roadmap that envisions a progression from tokenized funds to tokenized assets and eventually tokenized cash flows. This long-term vision includes models where investors hold tokenized assets directly in digital wallets while managers utilize smart contracts for administration. Woofun AI notes that the regulator remains open to granting waivers, allowing funds to utilize digital cash and stablecoins for settlement and specific expense payments.

Furthermore, the authority plans to seek further industry views in 2026 regarding the broader application of DLT in wholesale markets, indicating a phased approach to expanding the regulatory perimeter.

This policy statement follows a consultation opened earlier this month regarding the FCA's wider cryptoasset regime, which covers stablecoin issuance, trading, custody, and staking. The comprehensive framework resulting from these consultations is scheduled to take full effect in October 2027. The move reflects a broader global push to bring tokenized finance within established regulatory boundaries rather than allowing it to develop in parallel, unregulated systems. By clarifying the rules for DLT usage, the FCA aims to position the UK asset management sector as a leader in digital innovation while ensuring robust market integrity.