Key Takeaways:
The FCA's proposal would let UK retail funds allocate up to 10% of assets to crypto ETNs for the first time.
The UK Financial Conduct Authority proposed allowing retail investment funds to hold as much as 10% of their assets in cryptocurrency exchange-traded notes, the latest step in Britain's push to integrate digital assets into regulated markets.
"Our proposed 10% limit for UCITS and NURS would also mitigate the risk of significant impacts arising from crypto ETN exposure," the FCA wrote in its quarterly consultation paper published June 9.
The proposal covers UCITS schemes and non-UCITS retail schemes, the UK equivalents of mutual funds that pool money from retail investors into managed portfolios. The FCA said it did not believe allowing retail-focused funds "to have significant exposure" to crypto was appropriate "given the speculative nature of the underlying cryptoassets." Unregulated and qualified investor schemes face no cap but cannot be marketed to retail investors.
The consultation runs until July 13, after which the FCA will finalize the rules. The proposal follows the regulator's October 2025 decision to lift a ban on retail access to crypto ETNs, and comes alongside parallel consultations on stablecoin rules, custody and staking — placing the UK in closer alignment with the EU's MiCA framework.
The FCA's move addresses criticism that regulatory hurdles have left the UK at a disadvantage to other financial hubs. Crypto exchange-traded products have driven mainstream adoption globally, with US spot bitcoin ETFs gathering tens of billions in net inflows since their January 2024 approval.
The regulator is also seeking input on whether funds focused on holding long-term assets such as property should be excluded from crypto ETN exposure, arguing such investments may not align with those funds' stated objectives.
The Bank of England last month said it was reconsidering parts of its proposed stablecoin regime after crypto companies warned that holding caps and reserve requirements could stifle adoption. In April, the FCA published new rules for tokenized funds to ease blockchain adoption by asset managers.
Industry participants have broadly welcomed the proposal. "This is a measured step that gives fund managers a clear framework while protecting retail investors," a spokesperson for CryptoUK, the industry trade body, said.
This article is for informational purposes only and does not constitute investment advice.
