The UK's Financial Conduct Authority (FCA) is indicating a significant shift in how regulated investment funds can gain exposure to digital assets. In a proposal unveiled this week, the regulator is suggesting that authorized funds could be permitted to allocate up to 10% of their portfolios to crypto exchange-traded notes (ETNs).
This move, detailed in the FCA's 52nd quarterly consultation paper, aims to bridge a regulatory gap that has persisted even after retail investors were granted direct access to crypto ETNs in October 2025. The proposal would apply to Undertakings for Collective Investment in Transferable Securities (UCITS) and most non-UCITS retail funds, effectively opening a new avenue for institutional-style crypto investment.
The 10% cap is a crucial element. The FCA has stipulated that exceeding this limit could lead to a fund being reclassified as a restricted mass market investment, potentially jeopardizing its status as a mainstream retail product. For qualified investor funds, which cater to professional investors and high-net-worth individuals, no separate cap is proposed. However, long-term asset funds and non-UCITS retail funds structured as alternative investment funds will remain barred from holding crypto ETNs.
The UK asset-management industry has reacted positively. Jon Allen, head of innovation and operations at the Investment Association, described the proposal as a "practical step" that allows funds to access crypto exposure through regulated instruments. The FCA plans to allow holdings of crypto ETNs listed on recognized UK investment exchanges, as well as those in the EU and other global markets that meet existing eligibility criteria.
Fund managers will be required to demonstrate that any crypto ETN holdings align with a fund's stated investment objective and risk profile. Furthermore, exposure exceeding a minimal level must be disclosed as a key feature of the fund's strategy. Importantly, the FCA is not currently considering direct holdings of crypto assets by authorized funds. This position may be revisited after the impact of the future crypto regulatory framework and client-asset protection rules on fund structures is assessed.
The consultation period for these proposals runs until July 13. This latest development marks another stage in the UK's gradual expansion of crypto ETN access, following its introduction for retail investors and tax-advantaged accounts.
UK FCA Eyes Fund Crypto ETN Access
The UK FCA has proposed allowing authorized investment funds to allocate up to 10% of their assets to crypto exchange-traded notes (ETNs), enabling broader regulated crypto exposure. This move addresses regulatory gaps and is welcomed by the UK asset-management industry as a practical step forward.