The UK Financial Conduct Authority (FCA) published a consultation paper on tokenized funds (CP25/28) on October 15, 2025, proposing changes to its rules and guidance to enable authorized funds to use distributed ledger technology (DLT) and accelerate tokenization. This marks the first concrete step in implementing the “Blueprint for Fund Tokenisation” published by the Investment Association (IA) in November 2023, developed in collaboration with HM Treasury, the FCA, and industry stakeholders. The Blueprint set out a phased pathway for tokenization in the UK funds sector, with “Stage One” focused on moving unit registers onto DLT. The consultation now seeks to make that a reality.
Although focused on authorized funds (UCITS and NURS), the proposals have wider significance. They show that the FCA is willing to adapt its rulebook to accommodate DLT—opening the door to new models of fund operation while maintaining existing investor protections. For private funds too, the consultation signals a clear direction of travel: towards greater efficiency, transparency, and digital record-keeping.
Two Models Under Consultation
The consultation explores two distinct models:
- Blueprint model (Stage One): Authorized funds would be permitted to issue and maintain their unit registers using DLT, so that units could be recorded and transferred on a blockchain rather than through a traditional register. Importantly, nothing else changes: the fund structure, custody of assets, and depositary oversight remain exactly as they are today. In effect, the FCA is delivering Stage One of the IA Blueprint by embedding tokenized registers into the authorized funds regime while preserving existing investor protections.
- Direct fund dealing model: Separately, the FCA is asking whether investors should be allowed to transact directly with a fund, rather than always through intermediaries. This option could apply to both traditional and tokenized funds. The aim is to simplify access and reduce distribution costs, though safeguards would be needed to ensure operational resilience and fair investor treatment.
Together, these proposals demonstrate that the FCA is not only implementing the IA’s staged approach to tokenization but also testing industry appetite for broader reform in fund dealing.
Why It Matters and International Context
The Blueprint model reflects a pragmatic, phased approach. It also signals to global markets that the FCA is ready to provide the “clarity and confidence” needed for the United Kingdom to remain competitive with other leading fund administration centers, such as Ireland and Luxembourg. Moving registers onto DLT has the potential to cut reconciliation and administration costs, deliver near real-time transparency, and support innovations, such as fractional holdings. The direct dealing model, if adopted, could further reshape how investors access funds by creating a more streamlined and potentially lower-cost route.
The United Kingdom’s approach should also be understood in the context of international developments. In the European Union, the DLT Pilot Regime (live since March 2023) grants infrastructures a controlled environment to trial trading and settlement of tokenized securities. While not fund specific, it lays important groundwork for how tokenized units could eventually be issued and traded across the single market. In the United States, regulators have permitted tokenized funds within the existing regulatory framework, with managers launching tokenized funds and share classes and service providers adapting transfer agency and custody functions to blockchain.
Against this backdrop, the consultation positions the United Kingdom between the European Union’s experimental pilot regime and the United States’ market-driven pilots: more cautious than the US, more structured than the EU, but crucially underpinned by clear rule changes designed to give firms confidence to innovate.
Implications and Next Steps
The consultation is a measured but important milestone. By delivering Stage One of the IA’s Blueprint and testing interest in a direct dealing model, the FCA is signaling a willingness to modernize fund infrastructure while protecting investors. The paper represents a shift from strategy to implementation: proposing rule changes to embed tokenization into the authorized funds regime, while opening discussion on a more radical shift in how funds interact with investors. It is both a chance to shape the rules and an opportunity to prepare for the efficiencies and competitive advantages that tokenization may bring.
Firms should now:
- Engage with the consultation: Feedback is due by November 21, 2025 for Chapters 2–4 and by December 12, 2025 for Chapter 5.
- Assess opportunities: Consider how tokenized registers or direct dealing could deliver efficiencies or open new channels.
Once the consultation closes, the FCA will review industry feedback and is expected to finalize and publish new rules and guidance in the first half of 2026. This will establish the framework for the first wave of tokenized authorized funds in the United Kingdom. The paper also makes clear that, if tokenization scales, the FCA will be prepared to consider further structural and regulatory changes to support more advanced models.