The United Kingdom’s financial regulator has published PS26/7, a policy statement that formalizes new rules and guidance to enable tokenized funds to operate within the existing fund regime rather than in separate experimental structures. The Financial Conduct Authority (FCA) frames tokenization and distributed ledger technology (DLT) as tools to improve efficiency and governance in asset management and describes the move as part of a broader digital assets roadmap announced in a January 2025 letter to the prime minister. According to Cointelegraph, the stance signals a deliberate effort to bring tokenized finance under the regulatory perimeter, ensuring oversight and consistency with established fund protections.
The policy statement presents a clearer path for asset managers to integrate blockchain into regulated fund operations while preserving investor protections. It reflects a cautious, structured approach to modernization that seeks to modernize market infrastructure without relaxing the safeguards that underpin regulated funds such as UCITS. The FCA emphasizes that the changes are designed to support innovation in the UK asset management sector while maintaining a stable, transparent regulatory framework.
Key takeaways
- The Blueprint model allows on-chain investor records to serve as the primary register for unit deals, without requiring a full off-chain duplicate, provided appropriate resiliency plans are in place.
- The Blueprint framework has already been used to authorize the first tokenized UK undertakings for collective investment in transferable securities (UCITS). Authorized funds may maintain their register on public distributed ledger networks if controls meet FCA standards, including issuing units across multiple blockchains so long as investor rights and charges remain consistent.
- The main policy shift introduces an optional Direct-to-Fund (D2F) dealing model, where the fund or its depositary, rather than the manager, acts as counterparty to investor trades, enabling a streamlined, near‑on‑chain settlement process.
- The FCA outlines a pathway from today’s tokenized funds toward tokenized assets and eventually tokenized cash flows, including models in which investors hold tokenized assets in digital wallets and managers use smart contracts to administer them.
- The regulator remains open to waivers enabling the use of digital cash and stablecoins for settlement and certain expenses; it will seek further views in 2026 on broader use of DLT in wholesale markets.
Regulatory framing: Integrating tokenized funds into the UK regime
PS26/7 formalizes how tokenized funds can operate within the UK’s established regulatory architecture. By accommodating tokenization inside the current fund regime, the FCA aims to preserve investor protections while removing unnecessary frictions that could push tokenized structures into parallel or off-regulatory channels. The policy aligns with the broader objective—initially articulated in the January 2025 letter—to create a coherent digital assets roadmap that guides innovation without eroding discipline on market integrity, transparency, and consumer protection. The directive signals to asset managers that blockchain-enabled fund operations can be designed to stay within the FCA’s risk controls and reporting standards, rather than evolving in standalone, unregulated environments.
In practice, the PS26/7 framework seeks to harmonize tokenization with existing disclosure, valuation, governance, and custody requirements. It emphasizes that on-chain processes must be supported by robust governance, risk management, and contingency planning, ensuring that tokenized funds remain subject to the same accountability and oversight as conventional funds. The policy's emphasis on regulatory perimeter reflects a broader policy trend across major markets toward integrating tokenized finance into established regulatory structures rather than permitting unregulated experimentation.
Implementation mechanics: Blueprint and Direct-to-Fund in practice
The core technical innovation under PS26/7 is the Blueprint model, which permits on-chain records to function as the primary ledger for unit deals, thereby reducing reliance on traditional off-chain registries where appropriate. Crucially, this approach requires “appropriate resiliency plans” to address continuity, data integrity, and disaster recovery. If those controls are met, on-chain records can underpin the fund’s official investor register, advancing settlement efficiency and alignment with on-chain or hybrid settlement flows.
Alongside the Blueprint, the policy introduces a Direct-to-Fund (D2F) dealing model as an optional mechanism to simplify investor interactions. Under D2F, the fund or its depositary acts as the counterparty to investor trades, rather than the fund manager. Transactions would clear in a single step, with units issued or canceled directly against cash movements between investors and the fund. The FCA describes D2F as a pathway to more efficient fund operations and a more straightforward alignment with on-chain settlement, while maintaining the standard investor protections and oversight that govern regulated funds.
These mechanics illustrate a careful balance: enabling practical, technology-enabled operations without compromising valuation, recordkeeping, or governance standards. The policy also notes that the first tokenized UCITS have already been authorized under the Blueprint approach and that funds may operate registers on public DLT networks if they satisfy FCA controls. Multi-blockchain issuance is permissible, provided investor rights and charges stay consistent, signaling a pragmatic view of evolving settlement ecosystems while preserving core protections.
Pathway to tokenized assets and cash flows: Roadmap and implications
Beyond tokenized funds, the FCA sketches a longer-term trajectory toward tokenized assets and tokenized cash flows. In this vision, investors could hold tokenized assets in digital wallets, with managers leveraging smart contracts to administer ownership, distributions, and related rights. This progression points to a more integrated, programmable asset framework in which on-chain mechanisms support governance, valuation, and settlement processes in a more automated and auditable manner.
The policy acknowledges the potential use of digital cash and stablecoins for settlement and related expenses, subject to waivers. While the current framework accepts controlled experimentation, the FCA signals a broader review in 2026 on the wider application of DLT in wholesale markets. This approach reflects a measured pace toward broader tokenization across the financial system, balanced against risk management, custody capabilities, liquidity considerations, and cross-border regulatory coordination.
In the UK context, the PS26/7 update complements the ongoing crypto asset regime developments, including a separate consultation on guidance for stablecoins, custody, and staking, and ongoing efforts to align with international standards. The regulator remains attentive to licensure, supervision, and interoperability requirements as tokenized products interact with banking, custody, and market infrastructure partners, underscoring the regulatory intent to integrate innovation within a robust compliance environment.
Compliance, oversight, and market-structure implications
For asset managers, custodians, and institutional investors, the PS26/7 framework clarifies how tokenization fits within existing regulatory responsibilities. By enabling on-chain registers and optional D2F dealing, the FCA provides a path for innovative fund structures to maintain compliance with disclosure, valuation, investor rights, and fee governance while pursuing efficiency gains from blockchain technologies. The emphasis on resiliency, cross-chain compatibility, and consistent rights and charges is designed to prevent fragmentation of investor protections as funds experiment with new settlement and recordkeeping models.
From a regulatory perspective, the move reinforces the UK’s intent to regulate tokenized finance rather than permit it to operate in parallel, unregulated ecosystems. This has implications for license applicants, intermediaries, and service providers that support tokenized funds, as they must demonstrate adherence to FCA standards for governance, risk management, custody, and information security. The policy also situates the UK within a broader international discussion on how to harmonize tokenization with frameworks such as the EU’s Markets in Crypto-Assets Regulation (MiCA) and other cross-border regulatory regimes, acknowledging that firms with UK operations may have to navigate multiple jurisdictions as tokenized products scale globally.
As part of the ongoing policy dialogue, the FCA’s 2026 views on wholesale market DLT use will be closely watched by exchanges, banks, and asset managers seeking predictable paths to connect traditional financial infrastructure with on-chain processes. The evolution of licensing, supervisory expectations, and cross-border cooperation will shape how quickly and widely tokenized fund and asset structures are adopted beyond the UK market.
Closing perspective
The FCA’s PS26/7 represents a pragmatic step toward embedding tokenized finance in the UK’s regulated fund regime, balancing innovation with risk controls and investor protections. As market participants adapt to the Blueprint and D2F models, the key questions will center on governance robustness, cross-chain interoperability, and the pace of broader regulatory alignment with international standards. The coming years will reveal how the UK coalesces tokenization into its market structure, with ongoing policy work, waivers, and consultations shaping the path forward for asset managers and their counterparties.
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