The UK’s Financial Conduct Authority (FCA) has proposed a new regulation that would allow investment funds to allocate up to 10 percent of their assets to cryptocurrency exchange traded notes (ETNs). This initiative aims to broaden regulated funds’ indirect access to digital assets.
Framework for the proposal clarified
The proposal was published as part of the FCA’s 52nd quarterly consultation paper, with a public comment period open until July 13. Under the plan, qualified portfolio managers could include crypto ETNs in their funds so long as the total exposure does not exceed the 10 percent threshold. Fund managers would also need to demonstrate that these products align with the fund’s stated investment objectives and risk profile.
The FCA stated that the 10 percent cap is intended to limit risk concentration and to prevent funds from entering an area of regulation that could complicate their classification as retail products at higher allocation levels.
According to the draft, funds will be able to add crypto ETNs traded on recognized UK exchanges to their portfolios. ETNs listed on approved exchanges in the European Union and other global markets that meet existing market eligibility criteria are also expected to qualify.
Mini glossary: An ETN (Exchange Traded Note) is a debt security traded on an exchange that tracks the return of an asset or index. Like ETFs, ETNs can be bought and sold on the stock market but carry the credit risk of the issuer.
Which funds are included and excluded
While the proposal applies to a broad range of investment firms, it draws clear boundaries around its scope. Some investment plans serving professional investors and high-net-worth individuals would not face the allocation cap.
In contrast, long-term asset funds and non-UCITS retail schemes structured as alternative investment funds are to be fully excluded from holding crypto ETNs. The FCA’s stance on direct crypto asset ownership remains unchanged; these funds cannot hold cryptocurrencies directly, but may gain exposure only through approved and listed crypto ETNs.
The regulator noted that it may revisit its position after assessing how the upcoming crypto regulation framework and investor protection rules impact fund structures.
Latest developments in the UK market
This new proposal comes in the wake of recent regulatory shifts in the UK’s crypto ETN space. In October 2025, the FCA lifted its ban on retail investor access to crypto ETNs, reopening a market that had been closed for four years. Since then, financial institutions such as 21Shares, Bitwise, WisdomTree, and BlackRock have listed physically-backed Bitcoin and Ether products on the London Stock Exchange.
By April 2026, UK investors were permitted to hold crypto ETNs within Innovative Finance ISA accounts, having previously been restricted from new purchases in traditional stock and investment ISAs. The current proposal is designed to address a regulatory gap where retail investors can directly access these products, but funds managing their money cannot.
Jon Allen, head of innovation and operations at the Investment Association, described the proposal as a practical move that would allow funds to access crypto via regulated ETNs. The regulation is also said to align with the European trend, where similar products are permitted in countries like Germany, Switzerland, and the Netherlands.
