TLDR
- UK FCA proposes allowing authorized funds to hold up to 10% in crypto ETNs.
- The consultation forms part of the FCA’s 52nd quarterly paper and closes on July 13.
- UCITS and most non-UCITS retail schemes would qualify under the proposed framework.
- Qualified investor schemes would face no allocation cap under the proposal.
- Long-term asset funds and certain alternative investment funds remain excluded.
The UK Financial Conduct Authority has proposed allowing authorized investment funds to allocate up to 10% of assets to crypto ETNs. The plan forms part of its 52nd quarterly consultation paper and opens a five-week comment window. The regulator aims to address a regulatory gap affecting authorized retail funds.
The proposal covers UCITS schemes and most non-UCITS retail schemes operating in the United Kingdom. However, the FCA set a firm 10% ceiling on crypto ETN exposure for these funds. The consultation period will close on July 13.
FCA Sets Framework for Crypto ETNs Exposure
The FCA stated that the 10% cap preserves funds’ status as mainstream retail products. The regulator said higher exposure could reclassify funds as restricted mass-market investments. Therefore, the limit maintains clarity within existing retail rules.
Qualified investor schemes would face no cap under the proposal. However, long-term asset funds and certain alternative investment structures would remain excluded. The FCA said cryptocurrencies do not align with those structures’ objectives.
The regulator confirmed that funds may hold crypto ETNs listed on UK-recognized exchanges. Funds may also access ETNs traded on eligible EU and global markets. Managers must ensure holdings align with disclosed objectives and risk profiles.
Managers must disclose crypto ETN exposure beyond a genuine de minimis level. The FCA stressed that it will not permit direct crypto asset holdings for authorized funds. It will review that position after assessing the incoming crypto regulatory regime.
Industry Response and Market Developments
The Investment Association welcomed the FCA’s proposal. John Allan said, “We welcome this sensible and pragmatic step from the FCA.” He added that regulated ETNs offer a transparent route compared to unregulated alternatives.
Allan said the 10% limit helps manage risk within retail fund structures. He stated that the framework supports innovation within established investment rules. The trade body supports access through listed and regulated instruments.
The proposal follows earlier regulatory changes in the UK crypto ETN market. In August 2025, the FCA lifted its four-year retail ban on crypto ETNs. Later, in October 2025, issuers listed physically backed bitcoin and ether products on the London Stock Exchange.
Issuers such as 21Shares, Bitwise, WisdomTree, and BlackRock launched products within days of approval. In April 2026, HMRC allowed tax-free access through the Innovative Finance ISA route. However, standard stocks-and-shares ISAs no longer permit new crypto ETN purchases.
Fund managers and depositaries had raised access questions during a June consultation. The FCA incorporated those discussions into the current proposal. The consultation on fund allocation rules will close on July 13.
