UK FCA Unveils Fund Tokenization Roadmap, Targets Global Leadership in Digital Asset Management

The FCA's Strategic Initiative for Asset Management

The UK Financial Conduct Authority (FCA) has unveiled a comprehensive roadmap designed to facilitate the adoption of blockchain technology for fund tokenization within the asset management sector. This initiative aims to provide critical regulatory clarity, stimulate innovation, and drive growth, positioning the UK as a potential global leader in digital finance. Simon Walls, Executive Director of Markets at the FCA, emphasized the transformative potential of tokenization, stating it could fundamentally alter asset management and deliver benefits to both the industry and consumers.

The FCA's plan includes guidance for operating tokenized fund registers under current regulations, leveraging the UK Blueprint model developed in collaboration with the Investment Association (IA) and the Technology Working Group (TWG). This blueprint, published in November 2023, outlines key design features, operational processes, and legal and regulatory considerations. The roadmap further proposes a simplified dealing framework for processing both traditional and tokenized fund units, alongside a strategy for advancing blockchain-based settlement.

Deconstructing Tokenization Mechanics and Regulatory Frameworks

Fund tokenization involves digitizing core administrative components of an investment fund, such as client, asset, and unit registers, and representing this information as tokens on a blockchain ledger. This process aims to enhance transparency and provide a shared system of record, reducing settlement risk and optimizing intermediary chains. The FCA's guidance allows for the tokenization of fund units on a Distributed Ledger Technology (DLT) platform managed by Smart Contracts, while ensuring a master unit register aligns both tokenized and non-tokenized units with existing rules.

The FCA's proposals extend to a roadmap addressing key barriers, including the use of public blockchains and the full on-chain settlement of transactions. The Digital Securities Sandbox (DSS), launched in late 2024, facilitates real-world testing of tokenized equities, debt, and fund shares under a modified regulatory perimeter, with a full legislative proposal anticipated in 2026. This phased approach, supported by entities like the Bank of England, seeks to establish the necessary infrastructure and data standards for a robust fund tokenization ecosystem in the UK.

Business Strategy and Market Evolution

The UK's proactive stance on fund tokenization aligns with a global trend towards integrating digital assets into traditional finance. Governments and regulatory bodies in jurisdictions such as Hong Kong, with its issuance of tokenized bonds, and the United States, through the SEC and CFTC, are actively exploring or implementing frameworks for tokenized assets. The EU Markets in Crypto-Assets (MiCA) regulation and the EU DLT Pilot Regime also underscore this international momentum.

Major financial institutions are already engaging with tokenized assets. Firms including BlackRock, WisdomTree, and Franklin Templeton, alongside Web3 native companies like Ondo Finance, are leading efforts in tokenized Money Market Funds (MMFs). Tokenized MMFs surpassed $1 billion in assets under management (AUM) by Q1 2024, with BlackRock's tokenized MMF alone exceeding this milestone. This institutional adoption highlights the perceived benefits of tokenization, which include enhanced efficiency, reduced reconciliation and data-sharing costs for asset managers, and broader access to private markets and infrastructure investment for consumers.

Broader Market Implications and Growth Projections

The FCA's roadmap is a strategic move to secure the UK's competitive edge in the evolving global financial services ecosystem. It addresses the "so what?" by signaling a clear regulatory pathway that could unlock significant market value. The market capitalization of tokenized funds is projected to reach an estimated $1.9 trillion by 2030, according to analyses by McKinsey, Galaxy Digital, and Citigroup (Citi). More optimistic scenarios, from reports by Ripple and Boston Consulting Group (BCG), suggest this figure could potentially increase to $12 trillion.

As of early October 2025, the tokenized Real-World Assets (RWAs) market on-chain already stands at approximately $33.20 billion, demonstrating tangible progress. The initiative is expected to foster deeper integration with the broader Decentralized Finance (DeFi) ecosystem, create new avenues for fund distribution, and ultimately lead to more cost-effective and personalized investment opportunities for consumers. The UK's ambition is to leverage this technological shift to drive fundamental changes in asset management, establishing itself as a world leader in regulated digital finance.