FCA CP25/28: What UK Fund Managers Need to Know About Fund Tokenisation
The Financial Conduct Authority (FCA) has published a consultation paper, CP25/28: Progressing Fund Tokenisation, outlining proposals to enable authorised fund managers to use distributed ledger technology (DLT) within existing UK regulatory frameworks.
The consultation aims to explore how digital technologies can improve fund operations without requiring a complete rewrite of the UK’s fund regulation regime.
For fund managers, lawyers, and investors, CP25/28 provides early insight into how tokenisation may be introduced into mainstream fund management over the coming years.
Overview of FCA CP25/28
The FCA’s consultation follows the initial “Technology Working Group” report commissioned by HM Treasury in 2023, which recommended steps for a phased approach to fund tokenisation.
CP25/28 focuses on three areas:
Allowing authorised fund managers to maintain unit-holder registers using DLT systems.
Introducing new dealing and settlement models that enable faster or near-instant transactions.
Clarifying operational and oversight expectations for firms using digital infrastructure under the COLL and AIFMD rulebooks.
The paper is part of the FCA’s broader digital strategy, which encompasses projects under the Digital Securities Sandbox and initiatives aimed at enhancing operational resilience in the UK financial services sector.
Definition of Fund Tokenisation
In the FCA’s framework, tokenisation refers to using distributed ledger or blockchain technology to represent fund units or ownership interests digitally.
This differs from cryptocurrency or cryptoasset products. Tokenised funds remain regulated collective investment schemes or Alternative Investment Funds (AIFs) and are still subject to the same conduct, capital, and reporting requirements.
Key points:
Each “token” represents a fund unit or share, recorded on a DLT rather than a traditional register.
The fund’s strategy, risk profile, and investor protections remain unchanged.
Authorised fund managers retain full responsibility for governance, valuation, and oversight.
Why are the FCA exploring tokenisation?
The FCA has stated that tokenisation could enhance efficiency and transparency within the fund industry. Potential benefits include:
Faster settlement and reduced reconciliation delays
Automated record-keeping and transfer of ownership
Improved data integrity through immutable registers
Operational cost reductions in administration and investor reporting
The FCA also notes the importance of maintaining investor safeguards. Any adoption of DLT must continue to meet the standards of existing UK fund regulations, including oversight by senior management functions (SMF16 and SMF17).
What this means for fund managers.
If implemented, these changes could affect how UK fund managers operate administratively and structurally.
Practical implications include:
Operational changes: Fund unit registers may move from centralised databases to DLT platforms, requiring integration with existing fund administration systems.
Governance updates: Managers will need to assess DLT providers under outsourcing and operational resilience frameworks.
Risk management: DLT introduces new considerations such as cybersecurity, data recovery, and technology audits.
FCA supervision: Authorised fund managers remain responsible for compliance, governance, and investor protection regardless of the technology used.
The consultation does not currently change the regulatory perimeter. It explores how innovation can take place within existing FCA permissions.
The Current UK Fund Management Framework
Under the Alternative Investment Fund Managers Regulations (AIFMD UK), only FCA-authorised fund managers may operate an Alternative Investment Fund.
Authorisation can be achieved either by:
Becoming directly authorised by the FCA as an AIFM; or
Operating under a hosted AIFM model, where an authorised firm such as Infinity acts as the regulated manager while the investment team acts as a Fund Advisor and an Appointed Representative (AR).
At Infinity we operate a full-scope FCA-authorised AIFM, providing regulated fund management, and compliance oversight.
This structure enables investment teams to launch and manage funds within 12 weeks, compared to 12–18 months for direct FCA authorisation. Our hosted model supports both UK and offshore fund structures and ensures compliance with FCA and AIFMD obligations.
What’s next?
The FCA’s consultation period for CP25/28 closes later this year. Subject to industry feedback, implementation guidance is expected in 2026.
Firms operating under AIFMD permissions need to review the following areas in preparation:
Governance frameworks to ensure readiness for technology integration.
Outsourcing arrangements for DLT providers.
Operational resilience and business continuity plans.
Investor communication processes regarding tokenised ownership structures.
Fund managers are encouraged to engage with their AIFMs, administrators, and legal counsel to understand how these changes may apply in practice.
We will continue to monitor developments and assist clients in aligning their structures with forthcoming FCA expectations.
Since our establishment in 2007, Infinity LLP has assisted clients across the full lifecycle of fund creation and management, from regulatory approval to investor reporting and exit.
Providing:
Regulatory hosting through our AIFM licence.
Full fund management services
Fund administration
Advisory support
Our structure enables clients to efficiently align innovation with regulatory standards. And our depth of experience, bringing more than 100 years of expertise, provides a practical foundation for supporting clients exploring tokenisation or other emerging technologies within the FCA’s framework.