Tokenisation from pilot to practice: A UK manager’s guide to the FCA’s proposals

Introduction

The Financial Conduct Authority’s (FCA) October 2025 Consultation, CP25/28 Progressing Fund Tokenisation, takes a clear step towards embedding distributed ledger technology (DLT) in the UK’s authorised fund regime. As a leading investment management centre with £14.3 trillion in assets under management, the UK benefits from the FCA’s strategic objective to be a smarter, innovation‑positive regulator. Against that backdrop, the FCA positions tokenisation as a means to improve operational efficiency, support consumer outcomes, and strengthen the UK’sglobal competitiveness.

CP25/28 sets out an integrated package of measures. It clarifies how tokenized registers can operate under the existing “Blueprint” model. It proposes a new direct dealing model (D2F) to streamline fund operations. It outlines a roadmap for wholesale use‑cases, including the use of tokenized money market funds (MMFs) as collateral and the settlement of transactions in digital cash. And it sketches a longer‑term vision for tokenized portfolio management and cash flows at retail scale.

Operating tokenized fund registers under the Blueprint

The “Blueprint” model, which was produced in November 2023 by the industry-led Technology Working Group in the previous government’s Asset Management Taskforce, sets out how firms could operate a tokenized unitholder register within existing regulatory requirements. The FCA’s proposed guidance in CP25/28 focuses on the practicalities of this. Below is a summary of the items discussed:

• Manager authority and unilateral control. The existing rules for operating authorised fund registers mean that the firm responsible for operating and maintaining the register must be able to unilaterally update the register. This could be to process court orders or life events; resolve fraud or defaults; and undertake mandatory redemptions. The FCA guidance suggests that this can be delivered through DLT functionality to mint, burn and unwind entries or through the responsible firm having direct control through master‑node privileges, private key control, or contractual mechanisms with unitholders.
• Smart contracts and eligibility verification. DLT may allow entities other than the manager to amend the register, which may improve the accuracy of register processes. However, in light of this, the FCA suggests firms consider additional technological controls to ensure tokens are only transferred to eligible investors, for example, by using “allow lists” or “whitelisting” architectures. The FCA notes that “deny lists” or “blacklists” could also be used but these may require additional verification steps to ensure adequate know your customer checks, particularly, given the ease of new address creation on public chains.
• Aggregation and reporting. The regulatory requirements mean that a register must remain complete and accurate at all times. The FCA proposed guidance confirms that managers may comply with the FCA’s rules even where unitholders’ positions are spread across multiple wallets, provided the platform can report holdings  at the unitholder level.
• Network risks and resilience. Firms should plan DLT contingencies for exceptional network outages. The FCA has confirmed that it intends to consult next year on non-Handbook guidance regarding the application of its existing operational resilience framework to the use of DLT.
• Format of unitholder registers. The relevant regulations require the register to be reproduced in legible form. Hybrid on/off‑chain solutions are acceptable where it is not possible to meet the requirements where fully on-chain so long as the records can be merged to meet inspection requirements and provide aggregate unitholder data.
• Public networks and conflicts of laws. Firms using public or consortium networks should assess whether this creates any conflict of laws issues which may undermine UK domicile/jurisdiction.

Roadmap: Tokenized MMFs as collateral and fully on‑chain investment markets

The FCA’s roadmap identifies two near‑term use‑cases supported by industry and government strategy:

• Tokenized MMF units (tMMFs) as collateral. Industry participants note that using tMMFs as collateral for non-centrally cleared over-the-counter (OTC) derivatives could deliver material efficiencies, reduce trading frictions, and temper procyclical pressures. Nevertheless, concerns remain, including divergent regulatory regimes across jurisdictions and varying interpretations around eligibility. There is also a risk of amplifying liquidity runs given heightened investor visibility, alongside cyber-security vulnerabilities associated with smart contracts. The FCA has indicated that it will engage with industry and international counterparts and will support firms seeking to explore the use of tMMFs as collateral.
• Digital cash instruments and stablecoins for unit dealing. To enable fully on‑chain funds, managers, depositaries, and investors may need to hold digital assets, including qualifying stablecoins or tokenized deposits to facilitate unit deals, and native tokens for gas fees (which are akin to transaction charges to those who operate the blockchain network). The FCA supports the development of qualifying stablecoins and fully on-chain funds and is considering how sandboxes and rule waivers or modifications could be used to support innovation ahead of finalizing the UK regime on stablecoin issuance and cryptoasset custody.

Future tokenisation models: From funds to assets to cash flows

The FCA recognises that technology is reshaping consumer expectations and that many firms view tokenized portfolio management as a means to service the digital investor. Leaving aside registers and dealing mechanics, the FCA explores in CP25/28 a three‑phase evolution of tokenized portfolio management models:

• Phase 1 - Tokenized funds: CP25/28 addresses the maintenance of unitholders registers using DLT and the execution of dealing and settlement through DLT.
• Phase 2 - Tokenized assets and portfolios: The movement towards programmable tokens and selfexecuting smart contracts which allow consumers to directly hold tokenized assets in digital wallets. Model portfolio smart contracts may also be maintained where asset managers manage client holdings through ‘micromodel portfolios’ to meet the needs and objectives of similar groups of consumers.
• Phase 3 - Tokenized cash flows: This target ‘end-state’ involves direct holdings of tokenized assets being broken down into cash flows, which are themselves held in tokenized form. Advisers may assign these tokens to meet lifestyle goals, enabling customized portfolio management.

Design for composability

Composability looks to maximise the ‘re-use’ of existing technological and operational components to build new DLT applications and services. Composability may be considered at both the token and process levels. At the token level, tokens may be used to make assets composable by breaking down assets into the cash flows that make up assets. At the process level, smart contracts may be layered on top of tokens to reduce the number of technological operating processes across different product types, asset classes and clients. Composability relies on standardization of tokens, smart contracts and networks and also on operational and regulatory processes. There are already examples of standardized tokens in the market, for example, the International Capital Markets Association DLT Bond Data.

Timing and industry response

The deadline for comments on CP25/28 was 21 November 2025 and the FCA is expected to publish its Policy Statement during the first half of 2026.

The Investment Association (the IA) has responded to the consultation and offered certain recommendations including; the need for further clarification on the regulatory treatment of register operators, especially regarding the interplay between existing COLL and OEIC regulations and new requirements for the safekeeping of specified investment cryptoassets. It also highlights the importance of consistent and proportionate disclosure requirements for investors, particularly in relation to any nuances in relation to different tokenisation models. Additionally, the IA urges the FCA to confirm that technological choices, such as issuing units on multiple blockchains will not unintentionally create new unit classes or regulatory obligations provided the underlying rights and exposures remain unchanged. It will be interesting to see where the FCA land after consideration of these and other market participants’ recommendations when it issues its Policy Statement.

Practical takeaways for UK asset managers to consider

In anticipation of the new rules, AIFMs, depositaries, portfolio managers, investment platform providers, fintech firms and any person interested in the evolution of fund tokenisation, may wish to consider the following points if the FCA follows through on its proposals:

• Adopt D2F where operationally efficient. The optional regime could remove principal exposure and client money complexity, align with international processes, and dovetail with T+1 platform change.
• Move ahead with tokenised registers. The FCA’s Blueprint guidance answers the friction points: manager authority, smart contract controls, wallet aggregation and public‑chain risk management, and it endorses technology‑neutral, outcomes‑based compliance.
• Prepare for tokenised collateral. Engage with depositaries and counterparties on the collateral use of tMMFs.
• Design for composability. Firms should consider designing standardised token and smart contract interfaces to support portfolio orchestration at scale.

Conclusion

CP25/28 translates tokenisation from pilot to practice. The FCA provides tangible regulatory clarity for tokenised registers, proposes an optional direct dealing regime to simplify unit transactions, and advances a roadmap for tokenised collateral and digital settlement. For UK asset managers, the near‑term opportunity lies in operational efficiency and alignment with global processes; the medium‑term prize is strategic differentiation in product design, distribution, and portfolio customisation. The regulator’s ambition is unmistakable: innovate within clear outcomes‑based guardrails and position the UK as a leading jurisdiction for tokenised and conventional funds alike.