UK fund blueprint opened a regulated route to tokenisation

The Technology Working Group of the UK government’s Asset Management Taskforce published a blueprint on November 24, 2023 for tokenising authorised investment funds within the country’s existing legal and regulatory framework. The Financial Conduct Authority said its high-level review with firms had found no obvious or significant barriers in the rules examined for the document’s deliberately narrow baseline model.

That was a meaningful institutional step for blockchain finance: the proposal placed distributed-ledger recordkeeping inside familiar regulated-fund structures instead of asking lawmakers to create a new asset class first. It was not, however, a blanket regulatory approval, a new FCA rule, or evidence that UK funds had already moved their portfolios and cash settlement on-chain.

What the baseline model changed

Under the baseline, or “stage one,” approach, an authorised fund’s conventional unitholder register could be replaced by tokens recorded on a private, permissioned blockchain for which the authorised fund manager remained responsible. The tokens represented shares or units in the fund; they were not a new cryptocurrency issued without an underlying regulated vehicle.

The limited design preserved the existing fund structure and the responsibilities of the manager, depositary and other participants. The portfolio would continue to hold mainstream assets. Valuations would continue daily, or on another schedule consistent with regulation and market practice. Cash settlement would remain off-chain through existing processes and timeframes, without digital money. Distributed-ledger technology would instead support the holder register and the processing of subscriptions and redemptions.

Those constraints explain why the regulatory assessment could reach a relatively permissive conclusion. The working group was not proposing, at this first stage, that a retail fund hold unbacked cryptoassets, settle with stablecoins, trade its portfolio entirely on public networks or replace every incumbent intermediary. It was applying a new recordkeeping layer to a structure whose legal roles and economic assets remained recognizable.

What the FCA actually established

The FCA’s November 24 letter said the agency and participating firms had reviewed relevant provisions in the Collective Investment Schemes sourcebook, Investment Funds sourcebook and Client Assets sourcebook at a high level. They identified no obvious or significant barrier to the baseline approach. The letter also made clear that individual models could differ and that firms remained responsible for their own due diligence and compliance.

That qualification matters. The blueprint did not authorize every implementation by announcement. A manager considering a new tokenised fund, or a material tokenisation-related change to an existing fund, still had to follow the applicable FCA authorization or approval process. Custody activity involving tokenised units inside the regulatory perimeter could also engage client-asset requirements. The central verified fact is therefore narrower than the “green light” shorthand used around the release: regulators saw a viable path under existing rules for the specified model, subject to firm-specific scrutiny.

Why it mattered on November 24

HM Treasury welcomed the report, which had been developed by a group chaired by Legal & General Investment Management chief executive Michelle Scrimgeour and included asset managers, market-infrastructure companies and digital-asset firms. The mix of participants gave the blueprint relevance beyond a single pilot because it documented a common starting architecture for a large investment-management jurisdiction.

Potential gains—greater operational efficiency, transparency and eventually broader access—were claims advanced by the government, regulator and industry group, not measured outcomes established on November 24, 2023. The documents disclosed no launched fund, customer count, assets under management, transaction volume, fee reduction or settlement-speed result attributable to the blueprint.

The defensible event-day conclusion was that UK institutions had mapped a compliant first step for fund tokenisation. Whether managers would adopt it, whether costs would fall, and which more advanced on-chain settlement or portfolio models could pass later regulatory review all remained unresolved.