UK Opens Door to Crypto in Mainstream Funds

FCA Proposes 10% Crypto ETN Cap for Retail Funds

The UK Financial Conduct Authority (FCA) has proposed allowing authorized investment funds to allocate up to 10% of their assets to crypto exchange-traded notes (ETNs), in what would be the first time such exposure has been permitted within mainstream fund structures. The proposal, contained in the regulator's 52nd quarterly consultation paper, targets UCITS schemes and most non-UCITS retail funds. A five-week consultation period is now underway, with feedback due by July 13.

Fund managers would be required to demonstrate that any crypto ETN holdings are consistent with a fund's stated investment objectives and risk profile. Exposure beyond a minimal level must also be disclosed as a material feature of the fund's strategy. The FCA was clear that it is not currently considering allowing authorized funds to hold crypto assets directly, and said it will keep that position under review until it has assessed the impact of the UK's incoming crypto asset regulatory regime.

Qualified investor schemes, which are limited to professional clients and sophisticated investors, would face no allocation cap under the proposal. However, long-term asset funds and non-UCITS retail schemes structured as alternative investment funds would be excluded from holding crypto ETNs entirely, as the FCA does not consider cryptocurrencies consistent with those structures' investment objectives.

A Step in a Broader Regulatory Shift

The proposal is the latest in a series of regulatory moves that have progressively opened the UK's crypto market. The FCA lifted its four-year retail ban on crypto ETNs in October 2025, after which major issuers including 21Shares, Bitwise, WisdomTree, and BlackRock listed physically backed Bitcoin and Ether products on the London Stock Exchange within days. In April 2026, UK investors also gained tax-efficient access to crypto ETNs through the Innovative Finance ISA wrapper.

The Investment Association, the UK's asset management trade body, backed the latest proposal. Similar products are already available to investment funds in several European markets, including Germany, Switzerland, and the Netherlands, putting pressure on UK regulators to close the gap.

The consultation reflects a wider effort by the FCA to bring crypto exposure into the regulated mainstream without dismantling existing consumer protections. The outcome will be closely watched by asset managers and international regulators alike.

Sources:
The Block: UK FCA proposes allowing authorized funds to allocate up to 10% to crypto ETNs
Crypto.news: UK FCA permits crypto ETNs for UK funds but imposes strict ceiling
FCA: FCA to lift ban on crypto exchange-traded notes