CFA UK and CFA Institute welcome the FCA’s support for technological innovation, with fund tokenisation being a prime example of the tangible application of technology in the investment sector. Many of our members work across asset management, trading platforms, and investment operations. They share an interest in a regulatory framework that promotes productivity and competitiveness while safeguarding investor protection.
Set out below are our high-level positions:
1. Regulatory challenges inherent in Distributed Ledger Technology (DLT)
- Support the FCA’s technology‑agnostic stance yet advocate a phased introduction, starting with private, permissioned networks where Authorised Fund Managers (AFMs) can safely assume register responsibilities.
- Encourage a gradual extension toward fully on-chain models as governance and control technologies mature, guided by industry engagement. A calibrated, iterative approach, rather than one‑off codification, to supporting responsible adoption of public network models is considered appropriate.
2. Regulatory alignment and interoperability
- Encourage the FCA to prioritise interoperability, including alignment with the UK stablecoin regime, the T+1 settlement cycle, and IOSCO’s 2023 digital asset policy recommendations.
- Suggest further FCA guidance to align public-network models with T+1 processes and minimise operational complexity.
3. Direct dealing and Issues and Cancellations (IAC) Account
- Support the introduction of an optional direct‑dealing model, alongside the existing AFM‑as‑principal framework.
- Recommend equal‑outcome disclosure for investors to understand that both routes deliver the same economic outcome, and clarify who holds the Money-Laundering Regulation duty for investors in direct dealing.
- Advocate proportionate relief on counterparty concentration if IAC has to be included in fund property, e.g., pre‑classify IAC‑driven breaches as “passive” or exclude IAC balances.
4. Investor disclosures and Consumer Duty
- Agree with concise disclosures on the use of IAC, including Financial Services Compensation Scheme (FSCS) applicability and insolvency risk.
- Advocate for investor choice between between traditional or tokenised routes where both are offered.
- Affirm that the existing Consumer Duty requirements provide adequate protection for limited fund use of cryptoassets for settlement and operational purposes, provided firms maintain standards of diligence, security, and transparency.
In conclusion, CFA UK and CFA Institute support the FCA’s efforts to modernise the UK funds regime through tokenisation. We encourage the FCA to pursue a pragmatic, phased approach – starting with private, permissioned networks under AFM controls, and advancing toward public-chain models as operational and legal frameworks mature. Aligning tokenisation policy with stablecoin regulation, T+1 settlement, and Consumer Duty would create a coherent, investor-focused, and competitive regulatory regime that positions the UK as a leader in responsible fund innovation.