The United Kingdom’s Financial Conduct Authority has proposed allowing authorized investment funds to allocate up to 10% of their assets to crypto exchange-traded notes, while keeping direct cryptocurrency ownership off limits.
Summary
- FCA proposes allowing authorized UK funds to invest up to 10% of assets in crypto ETNs while keeping direct crypto ownership prohibited.
- Qualified investor schemes would face no crypto ETN cap, but several retail and alternative fund structures would remain excluded.
- The proposal follows recent UK crypto ETN reforms, including retail access and tax-efficient investment options through IF ISAs.
According to the FCA’s 52nd quarterly consultation paper, the proposal would permit UCITS schemes and most non-UCITS retail funds to hold crypto ETNs, provided exposure remains within a 10% limit of total scheme assets.
The regulator has opened a five-week consultation period, with feedback due by July 13.
By setting a specific cap, the FCA said it intends to prevent authorized funds from taking crypto exposure large enough to alter their regulatory classification. The watchdog stated that higher allocations could push products into the category of restricted mass-market investments, creating additional requirements for funds marketed to retail investors.
Portfolio managers would also need to demonstrate that any crypto ETN holdings match a fund’s investment objectives and risk profile. The FCA added that crypto exposure exceeding a genuinely minimal level must be disclosed as a material part of the fund’s strategy.
Access expands through regulated products
Under the proposal, authorized funds would be allowed to invest in crypto ETNs listed on recognized UK exchanges as well as qualifying markets in the European Union and other jurisdictions that meet existing eligibility standards.
While the FCA is prepared to permit exposure through exchange-traded products, its position on direct cryptocurrency holdings remains unchanged.
The regulator said it is not currently considering allowing authorized funds to own crypto assets directly and will revisit the issue only after assessing the impact of the UK’s incoming crypto asset regulatory framework and client asset protection rules.
Not every investment vehicle would qualify under the proposed rules. Qualified investor schemes serving professional clients and sophisticated investors would face no allocation cap, while long-term asset funds and non-UCITS retail schemes structured as alternative investment funds would remain excluded from holding crypto ETNs.
Commenting on the proposal, Jon Allen, head of innovation and operations at the Investment Association, welcomed the FCA’s decision to permit crypto exposure through regulated ETNs.
“We welcome this sensible and pragmatic step from the FCA to allow funds to access crypto exposure through regulated ETNs as it supports innovation within a well-understood framework.”
Similar products are already available to investment funds in several European markets, including Germany, Switzerland, and the Netherlands.
Industry participants have been pressing for clarity on the issue since last year. During consultations on retail access to crypto ETNs, fund managers, depositaries, and ETN operators raised concerns that individual investors could gain exposure while many regulated funds remained effectively unable to do so.
UK crypto ETN market continues to develop
The consultation follows several regulatory changes that have gradually reopened the UK’s crypto ETN market. The FCA lifted its long-standing retail restriction on crypto ETNs in 2025, allowing individual investors to access the products after a four-year ban.
Within days of that decision, issuers including 21Shares, Bitwise, WisdomTree, and BlackRock listed physically backed Bitcoin and Ether ETNs on the London Stock Exchange.
Additional access arrived in April when fintech firm Stratiphy launched crypto ETNs through Innovative Finance ISAs, creating a tax-efficient route for investors after rule changes restricted new purchases through standard stocks-and-shares ISAs. As crypto.news reported earlier, the platform introduced ETNs issued by 21Shares covering Bitcoin, Ether, and a combined Bitcoin-gold product.
Crypto ETNs are also available through platforms including Interactive Investor, Freetrade, and Revolut, although those services do not currently offer Innovative Finance ISA access. Investments held through IF ISAs also fall outside the protection of the UK’s Financial Services Compensation Scheme.
