The UK’s Financial Conduct Authority (FCA) has proposed allowing authorized funds to allocate up to 10% of their assets to crypto exchange-traded notes (ETNs), marking a cautious expansion of digital asset exposure within regulated portfolios.
The proposal, published in the FCA’s latest quarterly consultation paper, is open for feedback until July 13.
FCA outlines limits for crypto ETN exposure
Under the plan, UCITS funds and most non-UCITS retail schemes would be permitted to invest in crypto ETNs, subject to a 10% cap. The regulator said the limit is designed to prevent funds from being classified as restricted mass-market investments, which would limit how they can be marketed to retail traders.
Funds aimed at professional and sophisticated market participants, such as qualified investor schemes, would not be subject to this cap. However, long-term asset funds and certain alternative non-UCITS retail schemes would remain excluded from investing in these products.
The FCA emphasized that exceeding the 10% threshold could alter a fund’s regulatory status and complicate distribution to broader retail audiences.
Compliance and disclosure requirements
The regulator said any exposure to crypto ETNs must align with a fund’s stated investment objectives and risk profile. Where exposure is meaningful, it must be disclosed clearly as a core component of the fund’s strategy.
Eligible funds would be able to access ETNs listed on recognized UK exchanges, as well as qualifying products in overseas markets. Fund managers will need to demonstrate compliance with existing rules before adding these instruments to portfolios.
Direct crypto ownership still off the table
The FCA reiterated that authorized funds will not yet be allowed to hold crypto assets directly. This position remains under review as the UK develops a broader regulatory framework for digital assets, including rules around client protection and custody.
A reassessment is expected once that framework is fully implemented.
Industry response and market context
The Investment Association signaled support for the proposal, with its director Allan stating that regulated ETNs offer a structured way to gain exposure to crypto while operating within defined risk limits.
The move builds on recent regulatory steps in the UK. In October 2025, the FCA lifted its ban on retail access to crypto ETNs, leading firms including 21Shares, Bitwise, WisdomTree, and BlackRock to list Bitcoin and Ethereum products on the London Stock Exchange.
Further momentum came in April 2026, when HM Revenue and Customs allowed crypto ETNs to be held within Innovative Finance ISAs, extending tax advantages to these instruments.
Consultation period underway
The current consultation will run for five weeks, with market participants closely watching the outcome as the UK continues to integrate crypto products into its regulated financial system.
Curious how crypto funds work in practice? Learn about exchange-traded funds and structures behind regulated crypto exposure.
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