FCA’s new consultation aims to revolutionise UK fund industry through tokenisation

On 14 October 2025, the UK’s Financial Conduct Authority (FCA) launched a significant consultation paper, Consultation Paper 25/28, titled “Progressing Fund Tokenisation.” This initiative marks a crucial step in the FCA’s ambitious plans to modernise financial services by integrating distributed ledger technology into the funds industry, specifically targeting authorised funds where both the fund and the manager fall under FCA regulation.

The FCA’s consultation addresses multiple dimensions designed to facilitate the adoption of fund tokenisation. Key proposals include guidance on operating tokenised fund registers within the current FCA regulatory framework, using the UK Blueprint model. This model envisions a comprehensive operation of the UK funds industry through distributed ledger technology, spanning the entire investment value chain. Additionally, the FCA proposes a streamlined alternative dealing model for fund managers to handle the buying and selling of units in both traditional and tokenised authorised funds. The consultation also outlines a roadmap aimed at overcoming principal barriers such as the use of public blockchains and the full settlement of transactions on-chain. A forward-looking discussion on how fund tokenisation models might evolve and the potential regulatory adjustments needed rounds off the paper. The FCA plans to review feedback thoroughly and publish final regulatory requirements in a Policy Statement expected during the first half of 2026.

This consultation follows closely on the heels of another FCA initiative published in September 2025, which sought input on minimum standards for crypto asset firms. These standards are designed to align many operational and risk controls with those of traditional financial institutions, including provisions for operational resilience and financial crime prevention. Notably, the FCA is also exploring the extent to which consumer protections, such as those under the Consumer Duty and the possibility of redress through the Financial Ombudsman Service, should be extended to crypto assets. Both sets of rules are anticipated to be finalised in 2026.

The FCA’s move on fund tokenisation aligns with broader UK government and industry efforts to embrace technological innovation in financial services. The Technology Working Group, established by the Treasury’s Asset Management Taskforce and reporting in November 2023, laid the groundwork for this direction. Their report underscored the potential of issuing fund units recorded on distributed ledgers to enhance efficiency and transparency in the asset management sector, signalling the UK’s openness to technology-driven progress.

Industry observers note the FCA’s endorsement of tokenised funds not only as a means to boost operational efficiency but also as a strategy to engage younger investors, particularly those aged 18-34. These younger investors have traditionally favoured equities and more accessible digital investment platforms over conventional funds, partly due to affordability and user experience. By embracing tokenisation on public blockchains such as Ethereum, the FCA aims to attract this demographic, making fund investment more streamlined and cost-effective. The proposals also raise the possibility of integrating stablecoins as a method of settlement in the future, though regulated fund investment directly in cryptocurrencies is not part of the current framework but may be considered down the line.

The FCA’s move comes amid a broader government strategy to refine financial regulation. For example, in September 2025, the government proposed consolidating the Payment Systems Regulator (PSR) within the FCA to simplify the regulatory environment for payment systems. Such streamlining efforts are designed to foster a trusted, world-leading ecosystem for payments and digital finance.

Meanwhile, the FCA continues to actively scrutinise other areas of financial services. Its 2025 Annual Report on Concurrency detailed ongoing market studies into sectors such as motor and home insurance premium finance and the distribution of pure protection insurance products. These studies reflect a wider regulatory focus on fair value and competition in financial markets.

Complementing these developments, the UK government is consulting on updates to the regulatory framework for Alternative Investment Fund Managers (AIFMs) and crafting a comprehensive regime for cryptoassets. These parallel initiatives collectively illustrate a robust policy environment intent on supporting innovation while safeguarding market integrity and consumer protection.

In summary, the FCA’s consultation on progressing fund tokenisation heralds a pivotal moment in the UK’s financial landscape. By embracing distributed ledger technology for funds, the regulator seeks to modernise asset management, enhance operational efficiency, and broaden market participation, particularly among digitally savvy younger investors. Alongside concerted efforts to regulate crypto assets and streamline oversight, these steps point to a transformative era for UK financial services. Market participants and stakeholders are now invited to contribute their views as the FCA shapes the future regulatory framework, with final policies expected by mid-2026.