FCA consults on progressing fund tokenisation (CP25/28)
On 14 October 2025, the Financial Conduct Authority (“FCA”) published a consultation paper (CP25/28) on proposals to support fund tokenisation, including the introduction of a new model for direct dealing in funds, and a roadmap to advance it and address key barriers. The consultation also includes a discussion chapter on how tokenisation models could evolve and the corresponding regulatory changes that may be required.
The FCA’s proposed rules and guidance aim to support innovation and growth while maintaining high standards of consumer protection and market integrity. Fund tokenisation has great potential to drive fundamental changes and the FCA's move to look beyond feasibility to explore what practical supervised adoption in the UK authorised funds regime involves is a welcome development.
A brief summary of CP25/28 is set out below:
Accelerating tokenisation of authorised funds
CP25/28 provides guidance on operating tokenised fund registers under current FCA rules, using the UK Blueprint model (the “Blueprint”), which was published in November 2023, by the industry-led Technology Working Group (TWG) and set out how an authorised fund manager (“AFM”) can operate a tokenised unitholder register within existing legal and regulatory frameworks. The guidance is intended to clarify how AFMs can meet their existing regulatory obligations when using the Blueprint and should provide firms with greater confidence to adopt tokenised fund registers, whether through the Blueprint or more advanced future models.
Authority of manager
Under the Collective Investment Schemes sourcebook (“COLL”) and the Open-Ended Investment Companies Regulations (“OEIC Regulations”), an AFM must be able to unilaterally update the fund register. However, this is not the default operating model for some distributed ledger technology (“DLT”) networks.
The FCA’s proposed guidance notes that records formed by reference to a series of transactions must comply with its rules, including DLT functions such as ‘burning’ and ‘minting’ tokens or creating subsequent records to correct or create new entries. Additionally AFMs may update the register through direct control of private keys, ‘master-node’ functionality, or contractual relationships with unitholders.
The FCA also proposes to permit AFMs to use systems that combine on-and off‑chain records to comply with COLL and OEIC Regulations which require the register to be reproduced in legible form in the UK and be accessible to the FCA, depositary and investors, when this cannot be achieved fully on‑chain, provided the merged records satisfy unitholder inspection requirements and provide aggregate unitholder data.
Smart contracts and eligibility verification
Smart contracts can improve the accuracy of register processes and allow distributors and investors to instruct updates to the register, as well as transfer units between investors ( ‘peer-to-peer’ transactions). They may, however, require AFMs to implement additional technology controls to ensure regulatory compliance. The FCA suggests measures such as ‘whitelisting’ and eligibility verification systems to ensure only eligible holders receive units. AFMs must maintain a complete and accurate view of units in issue at unitholder level. Those with systems which operate using a ‘deny list’ or that blacklist specific wallet addresses should consider whether they need additional Know Your Customer checks.
Managing network risks
The FCA considers that where fund registers are maintained using DLT networks, AFMs should have alternative processes and contingencies in place to support unitholder operations during exceptional network outages. The FCA intends to consult on non-Handbook guidance on the use of DLTs in the first half of 2026, to provide greater clarity on their implications for operational resilience.
Fund efficiency and direct dealing in authorised funds
The FCA proposes a new direct-to-fund (“D2F”) dealing model for processing dealing in units of both traditional and tokenised authorised funds, allowing investors to transact directly with the fund rather than through an AFM. The FCA believe that the D2F model may also reduce costs for new market entrants and facilitate an easier transition to tokenised funds. The FCA will support the use of both the existing box/principal model and the D2F model, enabling AFMs to adopt whichever unit dealing model is most efficient for their funds.
Fund tokenisation roadmap
CP25/28 includes a roadmap to advance fund tokenisation and address key barriers including the use of public blockchains and full on-chain settlement to facilitate transactions as well as the possibility of digital cash instruments and money-like instruments as eligible fund assets.
The FCA is seeking feedback on how its rules can support these next steps and use cases, including where these rules may require further development.
Supporting future tokenisation models
CP25/28 includes a discussion on future tokenisation models that could use DLT to deliver retail-scale tokenised portfolio management services, including via model portfolios.
While the FCA does not currently endorse any particular future vision, it seeks to understand how the regulatory framework may need to evolve to accommodate these models and remain fit for purpose. Encouragingly, the FCA does seem to be open to engaging with the industry to discuss the potential options in this regard.
Next steps
The FCA invites comments on the proposals for new rules and guidance (Chapters 2-4) by 21 November 2025, and on future tokenisation models (Chapter 5) by 12 December 2025. The FCA intends to set out its final regulatory requirements in H1 2026.
We will produce a more in-depth article on CP25/28 with our thoughts, bringing in our experience from advising on the tokenised fund referenced in the consultation paper. If you have any questions about the proposed changes, please get in touch with the key contacts listed below or your usual contacts at CMS, who would be happy to discuss these considerations in more detail.
