Progressing Fund Tokenisation
Last week saw the FCA publish a consultation paper, CP25/28 on “Progressing fund tokenisation” with the aim to support innovation in UK asset management. It sets out how distributed ledger technology (DLT), the foundation of blockchain, can be used in authorised funds to improve efficiency, transparency, and investor access.
With £14 trillion managed across approximately 2,600 UK firms, tokenisation represents both a technological opportunity and a compliance inflection point.
Key themes discussed in CP25/28 include:
- Blueprint guidance for operating tokenised fund registers under current rules.
- A new Direct-to-Fund (D2F) model for streamlined investor dealing.
- A roadmap for on-chain fund settlement using stablecoins and tokenised assets.
- Emphasis on consumer protection, market integrity, and operational resilience.
Simon Walls, Executive Director of Markets at the FCA, summarised the ambition:
“Tokenisation has the potential to drive fundamental change in asset management […]. The UK has the opportunity to be a world leader here and we want to provide asset managers with the clarity and confidence they need to deliver.”
Tokenisation and Financial Crime Risk
The transition from traditional fund infrastructure to tokenised ecosystems expands the perimeter of financial crime compliance. As fund operations migrate to blockchain environments, compliance frameworks must adapt to monitor both on-chain and off-chain transactions in tandem. New challenges emerge around digital wallet KYC and ownership verification, on-chain transaction monitoring, and the integration of blockchain analytics with legacy systems. Additionally, data privacy, cross-jurisdictional oversight, and the immutability of ledgers create novel governance considerations.
Tokenisation offers unique potential for proactive financial crime prevention through immutable record-keeping, traceable transaction histories, and automated reporting mechanisms. However, without adequate safeguards, these same features could enable new avenues for obfuscation, such as anonymised wallet structures or decentralised trading models operating beyond current regulatory perimeters.
These challenges mirror those facing financial crime frameworks more broadly: the fusion of technology, regulatory expectation, and ethical data use.
FCA’s Corporate Finance Survey
Parallel to the FCA’s intention to modernise the financial system through tokenisation is their publication of a recent survey (October 2025) highlighting the urgent need to strengthen financial crime frameworks. The corporate finance firm portfolio currently includes around 440 firms, of which over 300 are not required to submit financial crime data. Of those 300, 270 CFF firms responded to the FCA survey. 11% of responding firms reported having no documented business-wide risk assessment (a requirement under the Money Laundering Regulations), 29% of principal firms failed to conduct financial crime risk assessments for their appointed representatives and 6% did not monitor compliance among them.
These weaknesses highlight how traditional financial structures can harbour compliance vulnerabilities. Tokenisation, with its embedded transparency and auditability, offers an opportunity to correct some of these systemic issues. Properly implemented, it can enable continuous risk assessment, automated control validation, and stronger assurance through real-time analytics.
Technological Integration
When it comes to financial crime compliance, the next evolution is the fusion of human expertise, data, and advanced technologies (AI, machine learning, graph analytics, NLP, and automation) into an integrated ecosystem that allows compliance teams to detect, prevent, and respond to financial crime proactively and holistically, rather than reactively and in silos. Modern RegTech enables firms to move from manual review towards continuous monitoring and proactive detection.
Key enablers include:
- AI-driven surveillance to detect behavioural anomalies and collusive communication.
- Smart data integration to unify customer, transaction, and communication data for a single risk view.
- Dynamic risk scoring that adjusts to geopolitical events.
- Workflow automation that removes repetitive KYC and screening tasks.
It is not as simple as saying technology alone is sufficient. Firms must also consider how cultural change, data governance, and leadership alignment are embedded if innovation is to deliver measurable assurance. Firms that modernise their compliance architecture through intelligent automation and hybrid delivery can gain impactful strategic agility.
Conclusion
Tokenisation is redefining the infrastructure of trust in financial services. The FCA’s CP25/28 demonstrates a clear intent to modernise asset management through innovation. The findings from the FCA’s corporate finance survey reveal persistent weaknesses in core financial crime controls, from inadequate risk assessments to poor oversight of appointed representatives.
These deficiencies highlight exactly why transparent, data-rich ecosystems like tokenised funds matter. Distributed ledger technology provides an immutable audit trail that, when combined with intelligent RegTech solutions, can close long-standing gaps in monitoring, verification, and assurance. Artificial intelligence and blockchain analytics offer firms the ability to detect risk in real time, while automation strengthens both governance and efficiency.
Ahead of any change management, firms should review the effectiveness of their current controls rather than simply demonstrate the existence of policies. They must also ensure robust data integrity across key financial crime processes, including KYC, sanctions screening, and transaction monitoring, while leveraging technology and analytics to keep pace with financial crime typologies as they evolve.