Need to know:
- Policy Statement PS26/7 makes UK full-fat funds tokenisation live, in response to its consultation. Ashurst's consultation overview here.
- The Financial Conduct Authority (FCA) is technology positive and ahead of schedule.
- Largely implementing the consultation proposals, these are important optional enhancements for the funds sector, including DLT as the authoritative record and the 'direct to fund' (D2F) model.
- Some clarifications and refinements to funds tokenisation remain in train (see below).
- The new rules signal crucial regulatory progress. For example, live mainstream digital assets adoption, blockchain as the sole and golden source of truth, and an ability to use public ledgers.
Recap
BNY's CEO, Robin Vince, has described tokenisation as a megatrend. Tokenisation is scaling rapidly and is crucially important for financial services - particularly for the UK asset management sector, which manages £16.5 trillion in assets, making it the largest in Europe and second largest globally.
Tokenisation is the process of representing an interest in asset ownership on a blockchain. A blockchain is a type of distributed ledger technology (DLT); in simple terms a digital store of structured data. See Ashurst's Digital Assets 101 for a more detailed overview.
Lack of regulation and/or regulatory clarity has been widely identified as the biggest barrier to tokenisation adoption. As a stop-gap, the Blueprint model had been put in place to explain to what extent the then UK regulation permitted tokenisation.
FCA Policy Statement PS26/7 responds to the October 2025 consultation. It drops into H1 2026 amongst a flurry of other UK digital assets regulatory activity (see for example here, here and here).
Live! UK funds tokenisation
The new rules and guidance are now in force. Consultation respondents almost universally supported the FCA's approach and ambition to accelerate funds tokenisation in the UK. The detailed rules and guidance are at Appendix 1 of PS26/7. We set out below some highlights.
- Golden source of truth. A digital ledger can be used as a fund's authoritative record. Provided that there are appropriate resiliency plans, no backup off-chain record is needed. This recognition of DLT as a digital asset's golden (and sole) source of truth is not limited to funds. The FCA's position has crucial implications for the entire financial services sector.
- Direct to fund. The new optional alternative 'D2F' model received "overwhelming" respondent support because of its increased efficiency, consistency with fund operations in other jurisdictions, and ability to facilitate on-chain atomic settlement. The D2F model enables investors to deal directly with the fund rather than via an authorised fund manager (AFM), through a single-stage issue and cancellation of units in exchange for cash settlement. D2F is available for both conventional funds and tokenised funds.
- Public ledgers. The use of public/ permissionless versus private/ permissioned blockchains continues to be a very hot global regulatory theme. Regulators are increasingly permitting the use of public/ permissionless ledgers provided that adequate guardrails are in place (for example see the Monetary Authority of Singapore's April 2026 Consultation). The FCA adopts the same approach, with the appropriate controls including operational resilience. Importantly, the FCA's position will not be limited to tokenised funds. The guidance clarifies that digital register activity can take place overseas or where the location is uncertain, provided the fund’s domicile is considered. This is significant; recognising the 'everywhere and nowhere' reality of blockchain. The FCA also clarifies that the use of public blockchains does not constitute regulatory outsourcing.
- Technology solutions. PS26/7 embraces the technology's attributes, such as the use of smart contracts for unitholder processes and to support KYC controls.
- Multiple blockchains. Units within a given class may be issued on multiple blockchains, provided that the underlying rights of holders and the nature of charges and expenses that may be taken from fund property remain the same across all networks.
- Common standards. The importance of common standards for digital assets is well recognised (see our previous commentary for more detail). The FCA - guided by the principle of outcomes-based regulation – has decided (for now) not to set standards, but to encourage the industry and its forums to drive this work.
- Digital cash. The FCA wants to support the development of digital cash and fully on-chain funds in the UK. It is open to consideration of funds using digital cash (e.g. stablecoins) for non-investment operational purposes, for example for settlement and paying distributions.
- Tokenised investments. The FCA does not see any regulatory barriers preventing UK authorised funds from investing in tokenised forms of eligible assets.
- Other regulatory obligations. Of course financial institutions will need to comply with all other applicable laws and regulations. The FCA notes data protection/ privacy and, in particular, the potential challenges of using public networks. See our commentary here for more detail generally on the interface of DLT and data protection/ privacy.
- Further policy & regulatory work. Further work is needed to implement some aspects of funds tokenisation, for example clarifications to protected cell legislation. The FCA is progressing this with other stakeholders, without holding up the more general regulatory changes. Clarifications are also in train for certain tax treatments. Work also continues on longer-term future tokenisation models.
Why this really matters
We described CP25/28 as a game-changer, and the same applies to PS26/7's implementation.
The FCA recognises the need to act quickly (e.g. rules "expected" in H1 2026, are in force from 30 April 2026) and to be pragmatic (e.g. implement now, fine-tune later). The UK regulator is ambitious (e.g. the D2F model), recognises the technology's massive potential (e.g. DLT as the authoritative record), and is planning for its likely development (e.g. public blockchains and digital cash).
Succinctly encapsulating these themes, the FCA in PS26/7 confirms that "We want to see change led by commercial propositions. We do not want regulation to stand in the way of change if there is demand and opportunity."
What's next
As we forecast, exponential growth in the global digital finance sector - markets, infrastructure, products and regulation - continues through 2026. The FCA recognises the exceptional pace, and we welcome both the specific and more general value and cadence that this Policy Statement adds to the digital assets ecosystem.
With two-thirds of 2026 left to run, there is much more coming down the UK (and global) regulatory track. In the UK, this includes an interim PRA update on prudential treatment of cryptoasset exposures (pending Basel's targeted review), the 30 September 2026 opening of UK Cryptoasset Regime applications, and FCA work on a vision for DLT adoption in UK wholesale capital markets.
Want to know more?
For further updates and more thought leadership visit our Digital Assets and Financial Innovation page.
Other author: Simon Williams, Counsel
