UK Moves Forward to Allow Asset Managers to Use Blockchain for Fund Tokenization

A regulatory milestone brings the UK closer to modernizing its financial infrastructure through blockchain technology.

The United Kingdom is taking another decisive step toward integrating blockchain into its financial markets. According to new government guidelines, asset management firms will soon be allowed to use distributed ledger technology (DLT) — commonly known as blockchain — to tokenize investment funds.

The initiative is part of the UK’s broader ambition to position itself as a global hub for digital finance and innovation, following similar moves in regions like the European Union, Hong Kong, and Singapore.

🔗 What is Fund Tokenization?

Fund tokenization involves converting traditional investment fund shares or units into digital tokens recorded on a blockchain. This allows for:

Faster settlements (reducing delays from days to minutes)

Lower operational costs

Enhanced transparency and auditability

24/7 market access for investors

In practice, tokenization could allow investors to buy and sell fund shares in real time, without intermediaries, while ensuring regulatory compliance.

🏦 The UK’s Strategy

The new framework follows recommendations from the HM Treasury and the Financial Conduct Authority (FCA). Both agencies have been studying how blockchain could improve efficiency and liquidity in the fund management industry, which oversees trillions of pounds in assets.

The FCA’s approach will start with a sandbox phase, allowing asset managers to issue tokenized funds in a controlled environment. This is expected to pave the way for broader adoption once the regulatory and technological standards are established.

🌍 Global Race Toward Tokenized Finance

The UK’s move aligns with a global trend. Major financial institutions — including BlackRock, JPMorgan, and Franklin Templeton — are already exploring blockchain-based fund structures. Tokenization is widely seen as the next step in financial evolution, enabling greater inclusion and liquidity across global markets.

Analysts estimate that over $10 trillion in assets could be tokenized by 2030, transforming how investors interact with financial products.

💬 What It Means for the Market

If successfully implemented, the UK could become a leader in institutional blockchain adoption, attracting asset managers seeking regulatory clarity and innovation. This also sets a precedent for how traditional finance (TradFi) and decentralized finance (DeFi) can coexist in a regulated environment