The Financial Conduct Authority (FCA) of the UK released consultation document CP25/28 on October 14, 2025, officially proposing a policy framework for fund tokenization. This policy aims to leverage blockchain technology to optimize investment fund operations, enhance efficiency and transparency, and provide clear guidance for fund managers to promote financial innovation and attract diverse investors. The FCA emphasizes that this move will help the UK consolidate its global fintech leadership position and is expected to reshape the traditional asset management landscape. This article will analyze the core of the policy, the implementation roadmap, potential benefits, and discuss its impact in conjunction with international cases.
01- Overview of the Policy Framework: Regulatory Innovation and Risk Balance
The FCA's new policy marks a strategic shift by UK regulators towards the application of blockchain. The policy permits fund managers to convert fund shares into blockchain tokens, enabling digital issuance and trading, thereby shortening settlement cycles and reducing operational costs. Traditional fund settlements often require T+2 days, while tokenization can achieve near real-time processing, significantly enhancing liquidity.
● Innovation Support Mechanism: The FCA provides a testing space for fund managers through a regulatory sandbox mechanism, encouraging blockchain integration while ensuring compliance. The policy covers both public and private funds but prioritizes highly liquid equity products.
● Investor Protection Measures: All tokenized funds must comply with existing rules, including risk disclosure, anti-money laundering requirements, and asset anchoring mechanisms to prevent systemic risks.
● International Reference: This policy draws on the experiences of the U.S. Securities and Exchange Commission (SEC) and the EU MiCA regulations, aiming to fill the regulatory gap in the UK regarding digital assets and promote cross-border fund flows.
02- Implementation Roadmap: Phased Advancement of Blockchain Integration
The accompanying roadmap from the FCA provides practical guidance for asset management companies, covering key steps from technical assessment to market expansion. The document emphasizes gradual adoption to avoid overburdening small and medium-sized institutions.
● Preparation Phase (by the end of 2025): Fund managers need to assess fund suitability, conduct blockchain compatibility testing, and collaborate with technology providers to simulate operations. The FCA recommends prioritizing tests on high liquidity funds to verify cost-saving potential.
● Issuance and Distribution Phase (early 2026): Tokens will be minted using standards like ERC-20 and issued through authorized platforms. Investors can participate directly using digital wallets, bypassing traditional intermediaries and enhancing accessibility.
● Market Expansion Phase (mid-2026 onwards): Support for secondary trading of tokens and fragmented holdings will be allowed, enabling small investments to attract retail participants. The FCA requires the integration of smart contracts to ensure automated dividends and value anchoring.
03- Analysis of Policy Benefits: Efficiency Improvement and Market Expansion
The core value of the tokenization policy lies in addressing structural pain points of traditional funds, including high costs and information asymmetry. Through the distributed ledger of blockchain, the transparency of fund operations will significantly increase, with each transaction being traceable in real-time.
● Operational Efficiency Optimization: Administrative costs are expected to decrease by 20%-50%, with settlement times reduced to seconds, supporting high-frequency trading and minimizing human errors.
● Enhanced Transparency: Immutable on-chain records can prevent incidents similar to the 2018 Woodford Fund crisis, boosting investor confidence.
● Expanded Investor Base: Fragmented tokens lower the entry threshold from tens of thousands of dollars to hundreds of pounds, particularly attracting the Gen Z demographic—over 60% of whom hold crypto assets but have low participation in traditional funds.
Indicators
Value (2025)
Currency
Total assets under management in the UK asset management industry
£1 trillion
Pound Sterling
Total assets under management globally
$147 trillion
US Dollar
Global tokenized asset market size
$124.4 billion
US Dollar
Size of tokenized money market funds (MMFs)
$7.4 billion
US Dollar
Total size of tokenized U.S. Treasury/MMFs (YTD)
£5.5 billion
Pound Sterling
BlackRock BUIDL fund AUM
£1 billion
Pound Sterling
Size of the tokenized private credit market (March)
$12 billion
US Dollar
04- International Case Studies: Insights from Global Practices
The FCA's policy draws on mature cases that demonstrate the feasibility and benefits of tokenization in practical operations.
● Blackstone BUIDL Fund: In 2024, Blackstone issued this money market fund on the Ethereum blockchain, rapidly reaching a size of $1 billion. The blockchain tracking mechanism reduced settlement time from days to hours, with fees decreasing by 15%, attracting institutional investors. This model provides a replicable issuance framework for UK fund managers.
● Franklin Templeton OnChain Fund: Since 2021, this fund has tokenized U.S. government bonds, supporting investments starting from $1. By 2025, its asset size exceeded $300 million. The automated dividend mechanism of smart contracts significantly reduced error rates, and UK’s Hargreaves Lansdown plans to develop retail products based on this.
● Sygnum Bank Private Fund in Switzerland: In 2023, Sygnum tokenized a private equity fund, enabling 24/7 trading and a 40% increase in liquidity. This case highlights cross-border potential, and the FCA's roadmap lists it as a reference to help UK funds attract capital from Asia and the Middle East.
These cases show that tokenization not only enhances efficiency but also expands market boundaries. Blackstone CEO Larry Fink noted that blockchain represents financial evolution rather than disruption. Analysts predict that by 2026, the size of tokenized funds in the UK will reach £50 billion.
05- Industry Impact Assessment: Ecological Reconstruction and Global Linkage
This policy will profoundly impact the £14.3 trillion asset management market in the UK, prompting a digital transformation of traditional models. Large and medium-sized institutions like Legal & General may take the lead, while small and medium-sized companies will have equal opportunities.
● Ecosystem Evolution: The emergence of on-chain custody and risk assessment services is expected to create thousands of jobs, particularly in the Manchester fintech cluster.
● Activation of Private Markets: The fragmented mechanism unlocks high-threshold assets, attracting pension funds and driving trillions in capital inflows.
● Global Ripple Effect: The UK's initiative may influence the EU and Asia, with the Hong Kong Monetary Authority and Japan's Nomura Securities expressing interest in following suit.
However, the transformation comes with challenges. Security risks need to be mitigated through quantum encryption and stress testing; the technology gap requires training for investors; privacy compliance must balance GDPR with on-chain transparency. The FCA emphasizes backup mechanisms to prevent on-chain failures. A report from JPMorgan predicts that by 2030, global tokenized assets will exceed $10 trillion, with a significant share from the UK.
Conclusion: Moving Towards a New Era of Digital Finance
The FCA's fund tokenization policy lays a solid foundation for financial innovation in the UK, bridging the traditional and the future through blockchain. This initiative not only optimizes operations but also reshapes the way investors participate, showcasing regulatory foresight. Despite facing technological and regulatory challenges, its potential cannot be overlooked. The asset management industry must actively respond to seize this strategic opportunity.
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