CurveBlock
Client money and custody arrangements are a cornerstone of retail investor protection in conventional fund markets. In the UK this protection is implemented through FCA client asset rules (CASS) for firms holding cash and through custody and trustee duties for custodians and depositaries. Tokenisation does not remove these obligations: custody solutions for digital fund shares must still deliver equivalent segregation, reconciliation, and insolvency protections so that retail investors’ economic interests are ring‑fenced from operator failures.
The Bank of England’s published work on settlement finality and market infrastructure sets out principles that bear on how tokenised securities are settled and recorded. Settlement finality, operational resilience and the interplay between privately operated ledgers and centralised payment systems are operational issues with legal consequences. Where token transfers are used as a means of effecting legal transfers of fund interests, the settlement mechanism must deliver certainty and must be compatible with insolvency law and regulatory oversight.
In practice, this creates a spectrum of custody models: regulated custodians offering segregated omnibus or segregated accounts; trust or nominee models that preserve beneficial ownership; and technology providers that pair ledger records with legal documentation confirming investor rights. Each approach requires specific controls — independent reconciliations, failover arrangements, and clear contractual terms — to meet the spirit and letter of client asset protections.
Retail investors considering tokenised fractional funds should therefore ask how client assets are held, whether the custodian or trustee is regulated, and how settlement finality is achieved so that legal protections similar to traditional custody are preserved.