PS26/7: Progressing fund tokenisation

Read PS26/7 (PDF)[1]

In this Policy Statement (PS26/7) we set out guidance on how authorised fund managers can employ distributed ledger technology (DLT) within our current framework. This includes use of the industry-led Blueprint model for tokenised funds, and more advanced use-cases.

Tokenisation is a way of representing an asset, or ownership of an asset, using distributed ledger technology. Tokenisation has the potential to lower costs and open up investment opportunities to a wider audience.

The policy statement also sets out: 

• New rules will be introduced to streamline fund dealing, through an optional Direct to Fund (D2F) model. This allows investors to transact directly with the fund itself, regardless of whether it is a traditional or tokenised structure.
• How fund tokenisation could develop over time as part of our roadmap for digital assets.

Who this is for

This policy statement applies to: 

• UCITS management companies. 
• UK Alternative Investment Fund Managers (AIFM) managing authorised funds. 
• Depositaries of authorised funds.

This paper might also be of interest to:

• AIFMs and depositaries of unauthorised funds. 
• Portfolio managers providing services to both professional and retail investors. 
• Investment platform providers.
• Financial advisers and investment consultants. 
• Custodians and cryptoasset custodians. 
• Fintech firms. 
• Stablecoin issuers and stablecoin backing asset pool providers.

Next steps

Our new rules for direct dealing in authorised funds are optional; firms should decide when to adopt them for new or existing schemes.

We have added Handbook guidance for fund managers wishing to keep the unitholder register on DLT, which firms should consider when launching a tokenised authorised fund.

The new rules and guidance take effect immediately.

Background

The UK asset management sector leads globally with £16.5 trillion under management. Asset managers are vital to the economy and support millions’ financial wellbeing. Tokenisation and DLT could make fund management more efficient, meet changing consumer needs, open new distribution routes, and broaden access to private markets and infrastructure investment.

In Consultation Paper 25/28[2] (CP25/28), we proposed guidance for firms launching tokenised authorised funds in the UK using the industry-led ‘Blueprint’ model, and a new, optional model for direct dealing in conventional and tokenised authorised funds. We also sought industry views on a roadmap to advance fund tokenisation and address key barriers, and initiated a discussion on future tokenisation models that use DLT to provide tokenised portfolio management at retail scale and how regulation may need to change to support this.

In our January letter to the Prime Minister[3], we confirmed we would progress our roadmap for digital assets within asset management. We want to enable innovation and embrace new technology while being predictable and proportionate, in line with our Strategy[4] to be a smarter regulator and support growth of the UK economy.