Scotland's Quiet Lead in Tokenised Funds: Why the UK's Window Won't Stay Open Forever
Updated: Oct 7
Jamie Marshall at CMS makes the case that tokenised funds are a historic opportunity for Scotland and the UK. The argument deserves a wider hearing, and the timing is tighter than most realise.
In a recent opinion piece in Scottish Financial News, Jamie Marshall, financial services specialist at CMS in Edinburgh, made the case that tokenised funds represent a historic opportunity for Scotland's fund management sector to cement its position as a global leader in financial innovation. The argument is worth engaging with on its merits, and the timing of the piece, published as the FCA's policy statement on fund tokenisation was about to land, gives it added weight.
Marshall's framing reaches back to the late nineteenth and early twentieth centuries, when Scottish fund managers established many of the first investment trusts. That tradition, he argues, continues today through the launch of the UK's first tokenised authorised fund by Baillie Gifford, advised by CMS's Edinburgh team. Whether tokenised funds become the next chapter of that lineage, or whether the opportunity is captured elsewhere, is now the question.
The Marshall Argument
The central claim is that tokenised funds offer genuine operational and distributional advantages over conventional ones. The automation of back-office functions, the more efficient sharing of information between fund operators, service providers, distributors and investors, and the longer-term potential to reduce costs through efficiency savings together create a credible competitive advantage. Tokenised funds, Marshall argues, can also open up new distribution channels through digital asset platforms, facilitate smaller-ticket investment, engage younger investors, and reduce settlement timescales in ways institutional investors will value.
The risks are acknowledged honestly. Set-up costs remain high. Promised efficiency savings are not yet realised at scale. Different service providers (digital transfer agents in particular) bring new due diligence and oversight requirements. Cyber risk and interoperability between blockchains are real engineering and governance challenges. None of this is fatal to the case for tokenised funds, but none of it is trivial either.
Marshall's most pointed argument is the structural one. Tokenised funds represent a category in formation. If the UK does not move decisively to claim leadership of that category, another jurisdiction will. The historical parallels he cites are pointed: Luxembourg's dominance in money market funds, Ireland's dominance in exchange traded funds. Both were captured during periods when other jurisdictions hesitated. Neither has since been recovered.
The piece welcomes the FCA's stance, which Marshall describes from direct experience as enthusiastic and constructive. Early regulatory engagement, he recommends, is a meaningful advantage. But the regulator can only provide favourable conditions. Adoption at scale, sufficient to refine the operating model and realise the benefits, has to come from the industry.
The Wider UK Pipeline
Marshall's piece is anchored on Baillie Gifford, which is reasonable given his firm's involvement. The wider UK pipeline is worth seeing alongside it, because it gives weight to the claim that the activity is real and that the window is open.
Baillie Gifford launched the UK's first tokenised UCITS feeder fund on the public Ethereum blockchain in June 2025, with Archax providing the digital securities infrastructure. The Strategic Bond Feeder Fund was the first regulated UK fund where the on-chain record served as the primary book of records rather than a mirror of an off-chain database.
Federated Hermes followed in October 2025 with the first UK-domiciled tokenised money market fund. Aviva announced a fund tokenisation project with Ripple in February 2026. Lingfeng Capital launched its Digital Venture Fund on the London Stock Exchange Group's Digital Markets Infrastructure, with Archax as the regulated digital securities partner, in April 2026.
Six weeks after the Lingfeng launch, the FCA published PS26/7 on 30 April 2026 with immediate effect, finalising the rules under which all of this activity now operates. Public chain operation is permitted with appropriate controls. On-chain records can be the primary register. The Direct to Fund dealing model is available as an optional alternative for both conventional and tokenised funds.
Taken together, this is a year of cumulative activity, not a single launch. Marshall's framing of "historic opportunity" looks better evidenced now than it did when he wrote the piece. The risk he names, that another jurisdiction captures the category, looks correspondingly more pressing rather than less.
What the Marshall Piece Does Not Quite Reach
This is where the opinion sits squarely in the world of authorised funds and asset managers, and it is worth thinking about the half of the tokenisation story that does not appear in it.
Tokenised funds are one route by which capital reaches productive use. Tokenised equity, issued directly by operating companies, is another. The two run on increasingly similar infrastructure, are addressed by overlapping service providers, and are governed by adjacent but distinct regulatory regimes. PS26/7 is the rulebook for the first. PISCES, with four approved operators including the London Stock Exchange, Asset Match, JP Jenkins and Vestd, addresses the secondary trading question for the second. The Cryptoassets Regulations 2026, with applications opening in September 2026 and the regime in force from October 2027, will address the issuance and intermediation perimeter for cryptoassets more broadly.
For Scotland and for the UK fund management sector, the Marshall argument is well made.
For the wider UK economy, the story is bigger. The same regulatory and infrastructural progress that supports tokenised authorised funds also creates the conditions for tokenised equity to become a credible fundraising route for UK companies that have historically been underserved by the existing capital formation system. Around 5.5 million UK SMEs operate today; fewer than one percent have ever raised equity. The capital formation gap is structural and persistent. Tokenisation does not, by itself, close that gap. But the combination of regulatory clarity, accessible infrastructure, and disciplined secondary markets through PISCES creates more possibility than has existed in any of the previous attempts to address it.
Marshall is right that the window will not stay open indefinitely. He is right about Luxembourg and Ireland. The same dynamic applies to the equity side of the story. Whoever builds the working architecture for tokenised early-stage equity, with the regulatory wrapper to make it credible to institutional capital, will define the category. The window for that is also open. It will also not stay open forever.
The case for tokenised funds is now strong enough that it does not need to be argued. The case for treating tokenised funds and tokenised equity as two halves of one story is the next argument worth making. Marshall has done the first half; the second half is the wider work in front of all of us.
How we got here
The Baillie Gifford launch began as a pilot. It was announced on 20 June 2025 by Theo Golden of Baillie Gifford, who described it as the UK's first fully tokenised regulated fund and held its tokens in a self-custodied wallet as part of the test. Archax's chief executive, Graham Rodford, called it a natively digital fund with its books and records on chain. The Investment Association and the FCA were both credited with supporting the pilot.
PS26/7 followed the FCA's consultation in CP25/28. Its practical effect is narrower and more technical than headlines suggest. An on-chain record of transactions may serve as the primary books and records for unit dealing, and a firm does not need a full off-chain mirror if it has suitable resilience plans. Units can be recorded on more than one blockchain, provided holders' rights and the charges taken from the fund stay the same. The FCA also dropped a proposed standby client money account for direct dealing, and will instead apply enhanced reconciliation rules to umbrella cash accounts.
What it means for UK founders
PS26/7 is a rulebook for authorised funds, not for startups raising money. Its direct opportunity is for founders building the tools fund managers now need: digital transfer agency, register and reconciliation software, wallet and custody services, and the resilience tooling that lets a manager rely on an on-chain record without an off-chain mirror. Those customers are regulated firms, so founders should expect detailed due diligence on operational resilience and controls before any contract.
For founders raising equity, the fund rules matter indirectly. They build familiarity with on-chain registers among the asset managers who may later invest in private companies, and they push infrastructure providers such as Archax to build services that could also serve tokenised equity. Founders considering a tokenised share issue still need to work within the rules for securities, and may want to take professional advice on how they apply.
What happens next
The FCA has said it will keep working with industry and HM Treasury on how omnibus accounts are treated under direct dealing. It plans to seek views later in 2026 on how UK wholesale capital markets might adopt distributed ledger technology, which may include composability, and it has invited firms exploring tokenised portfolio management to use its Innovation Services. Separately, the authorisation gateway for the new cryptoasset regime opened on 30 September 2026, ahead of the regime applying from 25 October 2027.
Sources
Frequently asked questions
What was the UK's first tokenised authorised fund?
Baillie Gifford launched the UK's first tokenised UCITS feeder fund, the Strategic Bond Feeder Fund, on the public Ethereum blockchain in June 2025, with Archax providing the digital securities infrastructure. It was the first regulated UK fund where the on-chain record served as the primary book of records.
What is FCA policy statement PS26/7 on fund tokenisation?
PS26/7, published by the FCA on 30 April 2026 with immediate effect, finalised the rules for tokenised funds in the UK. It permits public chain operation with appropriate controls, allows on-chain records to be the primary register and makes the Direct to Fund dealing model available as an option.
What are the benefits and risks of tokenised funds?
Benefits cited include back-office automation, more efficient information sharing, new distribution channels, smaller-ticket investment and faster settlement. Risks include high set-up costs, efficiency savings not yet realised at scale, new oversight requirements for digital transfer agents, cyber risk and interoperability between blockchains.
Why could the UK lose its lead in tokenised funds?
Tokenised funds are a category still in formation, and Jamie Marshall of CMS argues that if the UK does not move decisively another jurisdiction will claim it. He points to Luxembourg's dominance in money market funds and Ireland's in exchange traded funds, both captured while others hesitated.
Which UK firms have launched tokenised funds?
Beyond Baillie Gifford, Federated Hermes launched the first UK-domiciled tokenised money market fund in October 2025, Aviva announced a fund tokenisation project with Ripple in February 2026, and Lingfeng Capital launched its Digital Venture Fund on LSEG's Digital Markets Infrastructure in April 2026.
Disclaimer
This article is provided for general information only and does not constitute legal, financial, or investment advice. The regulatory treatment of tokenised assets and digital securities varies by jurisdiction and continues to evolve. Readers should seek independent professional advice before making any financial, legal, or regulatory decisions.
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