UK regulator proposes tokenisation of investment funds via blockchain

The UK’s Financial Conduct Authority (FCA) has unveiled proposals that would allow the tokenisation of investment funds - converting fund shares into blockchain-based digital tokens - in order to modernize trading, reduce settlement friction, and boost competitiveness in global asset management. 

Under the proposals, a “direct-to-fund” model would permit investors to subscribe directly to funds without intermediaries, while public blockchains may be used provided privacy and network security risks are addressed. The plans also envision tokenised money markets as collateral instruments, provided they maintain liquidity and safety.

The move follows growing global interest in tokenized assets and seeks to align the UK with jurisdictions like Luxembourg and Singapore, which are pushing ahead with digital finance strategies. However, the success of the policy depends on balancing innovation with regulatory safeguards, risk management, and investor protection.