UK FCA Approves Blockchain Fund Registers and Direct-to-Fund Model

The UK’s financial watchdog has moved tokenization out of the marketing sludge and into regulated finance. The Financial Conduct Authority (FCA) has approved rules that let asset managers use blockchain-based registers as the official record of fund ownership, alongside a new Direct-to-Fund model that cuts out intermediaries in fund dealing.

• PS26/7 makes onchain fund registers a live option immediately
• Direct-to-Fund (D2F) removes layers between investor and fund
• The FCA wants faster settlement, lower friction, and cleaner market infrastructure
• This is stage one of a wider tokenized finance roadmap

The FCA finalized the rules in policy statement PS26/7, and they take effect immediately. Roughly 2,600 firms managing about £16.5 trillion in assets can now use distributed ledger technology (DLT) as the official register of investor ownership. In plain English, that means a blockchain-style shared record can become the legal source of truth for who owns fund units.

That’s not a small tweak. In traditional fund administration, ownership records are often split across multiple systems and then reconciled later. That means delays, extra costs, and more chances for human beings to mess up the paperwork circus. Under the FCA’s framework, the blockchain can now do the bookkeeping job directly, instead of acting like a shiny demo bolted onto the side of legacy plumbing.

The regulator is not throwing open the doors to chaos, though. A full off-chain duplicate register is no longer required, but only if firms meet standards around resilience, governance, data protection, and financial crime controls. So no, “tokenized” does not mean “anything goes.” The FCA is letting the rails change, not abolishing the rules because somebody on a conference stage said “innovation” five times in a row.

The framework is flexible enough to work on public or private blockchains, including multiple networks. That matters. This is not a religious decree that one chain will rule them all. It’s a practical admission that different infrastructure may suit different use cases, even if some crypto purists would prefer every serious asset to live on an open network with fewer gatekeepers and less corporate cosplay.

What the FCA approved

The first piece is the onchain fund register. That is the official ownership record for a fund, now allowed to live on blockchain infrastructure. The second piece is the new Direct-to-Fund (D2F) dealing model, which lets the fund or its depositary transact directly with the investor.

A depositary is the entity that safeguards the fund’s assets and oversees whether the rules are being followed. In ordinary fund dealing, there are usually intermediaries sitting between the investor and the fund, which adds operational friction and slows everything down. D2F strips that out. Units can be issued or cancelled in one step as cash moves directly.

That is the sort of thing that sounds boring until you realize how much of finance is just boring things done badly and expensively.

The FCA says D2F could reduce operational friction and better fit faster settlement systems, including blockchain infrastructure. Firms can still use traditional dealing models, or mix both within umbrella fund structures. For anyone unfamiliar, umbrella funds are a structure with multiple sub-funds operating under one legal framework. So this is optional modernization, not a forced migration into the tokenized future at gunpoint.

Why this matters for tokenized funds

Simon Walls, the FCA’s executive director of markets, said tokenisation would “play an important role in asset management” and described the new framework as “a practical framework to give firms confidence in how fund tokenisation can operate within the FCA’s rules.”

“tokenisation would ‘play an important role in asset management’”

“a practical framework to give firms confidence in how fund tokenisation can operate within the FCA’s rules.”

That’s the regulator’s way of saying the experiment is over. The UK is no longer just tolerating tokenization pilots; it is building a legal path for them to become standard market infrastructure.

The move matters because fund ownership records sit at the center of asset management. If the register is wrong, delayed, or disputed, everything downstream gets messy. Moving that register onchain can make ownership transfers cleaner, faster, and easier to audit. It also creates a better foundation for future tokenized securities and tokenized cash flows, which the FCA has explicitly put on its roadmap.

The first live UK tokenized UCITS fund was authorized in January 2025 under the industry’s Blueprint model. UCITS is a highly regulated European fund structure designed to protect retail investors and standardize cross-border fund products. Tokenizing a UCITS fund is a meaningful step because it shows tokenization is not confined to crypto-native experiments or offshore sandbox theater. It is entering the mainstream asset management lane.

The FCA’s three-stage tokenization roadmap

The new rules are only stage one of a larger plan.

Stage one covers fund registers and fund dealing on DLT. Stage two would move traditional securities onchain. Stage three goes further, with tokenized cash flows that could allow portfolio management through wallets and smart contracts.

That progression is where things get interesting. If the legal record of ownership, the asset itself, and the cash flows that support it can all live on interoperable blockchain infrastructure, then you’re not just talking about a prettier back office. You’re talking about a different financial operating model.

That said, tokenization is not magic. A blockchain won’t fix bad governance, sloppy custody, or broken compliance. It will just let bad systems move faster, which is not always the upgrade people think it is. A distributed ledger is a better rail, not a virtue machine.

Stablecoins may be next

The FCA may explore digital cash and stablecoin settlement in consultations later in 2026. That part could end up being just as important as the fund register rules themselves. Settlement is where financial transactions are actually finalized, and the current legacy setup can be slow, expensive, and full of reconciliation drag.

If tokenized assets are the new rails, stablecoins or digital cash could become the fuel that keeps those rails moving cleanly. That’s where the real efficiency gains start to show up, rather than just in glossy whitepapers and conference panels full of exhausted buzzwords.

The broader cryptoasset regime under CP26/4 is a separate track. That package includes Consumer Duty rules, safeguarding requirements, and stricter governance for large stablecoin issuers. It is currently set to take effect in October 2027. In other words, the FCA is drawing a line between tokenized market infrastructure and the broader cryptoasset perimeter. Different rules, different risks, same regulator trying to keep the house from burning down.

The industry wants this badly

Tokenization has become one of the loudest narratives in finance, and for once it has something more substantial behind it than recycled hype. Asset managers, brokers, and trading platforms are pushing tokenized funds, tokenized bonds, and tokenized equities because the pitch is simple: faster issuance, easier transfers, lower costs, and better liquidity mechanics.

Bitwise CIO Matt Hougan and head of research Ryan Rasmussen recently said tokenisation, “the shift to issuing stocks, bonds, and other real-world assets on blockchains instead of traditional rails, is having a moment.”

“tokenisation, the shift to issuing stocks, bonds, and other real-world assets on blockchains instead of traditional rails, is having a moment.”

Robinhood CEO Vlad Tenev has gone even harder, calling tokenisation “like a freight train. It can’t be stopped, and eventually it’s going to eat the entire financial system.” He also said “most major markets will have tokenisation frameworks within five years.”

“Tokenisation is like a freight train. It can’t be stopped, and eventually it’s going to eat the entire financial system.”

“most major markets will have tokenisation frameworks within five years.”

That’s a big statement, and it has a whiff of Silicon Valley overconfidence about it. Still, it captures the direction of travel. Tokenization is no longer a niche crypto talking point. It is being sold as the next layer of financial infrastructure, and regulators are starting to build lanes for it instead of pretending it is all just speculative noise.

Big market, tiny tokenized slice

Even with the momentum, the numbers still show how early this is. The global stocks and bonds market is roughly $257 trillion combined, while tokenized real-world assets are only about $25 billion today. That gap is huge.

So yes, tokenization is real. No, it has not “won” anything yet. Anyone screaming that the entire financial system is about to be replaced tomorrow is either selling bags or trying to impress people at an event with too much free champagne.

The more accurate view is simpler: tokenization is moving from experiment to regulated infrastructure. That is meaningful. It is also a long way from mass adoption.

What could go wrong?

Tokenized finance still has plenty of failure modes. Smart contract bugs can break things. Custody mistakes can still happen. Interoperability between blockchains and legacy systems can be a nightmare. Privacy rules may clash with open ledgers. And if different jurisdictions build incompatible frameworks, institutions may end up with a mess of partially connected tokenized silos instead of a truly efficient market.

There is also the uncomfortable possibility that some “tokenized” products turn out to be old finance in a shinier wrapper. A blockchain does not automatically create better economics. Sometimes it just creates a new brand for the same old middlemen, except now they’ve added a few words like “onchain” and “programmable” to the pitch deck.

That is why the FCA’s approach is worth watching. It is not promising a revolution by decree. It is giving firms a regulated framework and forcing them to prove they can operate responsibly inside it. That’s a healthier posture than the usual crypto industry habit of shouting “disruption” while quietly hoping nobody asks about custody, compliance, or actual users.

What this means for Bitcoin and decentralization

For Bitcoin-minded readers, the lesson is straightforward: better rails matter. Bitcoin remains the hardest monetary asset in the room, but it is not trying to be the right tool for every tokenized fund structure or securities settlement model. That’s fine. It should not have to be.

What this move does show is that decentralized and distributed systems are increasingly being treated as serious infrastructure rather than internet clown makeup. Whether the future belongs to public blockchains, private ledgers, or some ugly hybrid of both, the direction is clear: centralized finance is being pushed to modernize or get left behind.

The real question is not whether tokenization exists. It’s whether it ends up as open, auditable, efficient infrastructure that lowers friction for everyone — or as another corporate moat with a blockchain logo slapped on top. The FCA has at least chosen to make that battle happen inside regulated finance instead of pretending the whole thing is beneath notice.

Key questions and takeaways

What did the FCA approve?
The FCA approved rules allowing blockchain-based fund registers and an optional Direct-to-Fund dealing model.

What is an onchain fund register?
It is a blockchain-based official record of fund ownership, replacing the need for a separate duplicate register in many cases.

What does Direct-to-Fund mean?
It means the fund or depositary deals directly with the investor, removing intermediaries from the transaction flow.

Why does this matter for asset management?
It can reduce operational friction, improve settlement speed, and make tokenized funds more practical under UK regulation.

Does this force all funds onto blockchain?
No. Traditional dealing models still exist, and firms can mix approaches within umbrella fund structures.

What comes next in the FCA roadmap?
The next stages point toward tokenized securities, tokenized cash flows, and possibly stablecoin or digital cash settlement.

Is tokenization already a huge market?
Not yet. The market is still tiny compared with global stocks and bonds, but the regulatory groundwork is now being laid in earnest.