The United Kingdom’s asset regulator, the Financial Conduct Authority (FCA), has proposed a new standing for investment funds which would allow them to have up to 10% of their assets in crypto exchange traded notes (ETNs), in a move geared towards opening regulated funds to digital asset exposure.
This proposal was published as part of the FCA’s 52nd quarterly consultation paper, with the consultation window closing on July 13.
FCA proposal
Portfolio managers at authorized funds could be allowed to hold crypto ETN positions so long as the total allocation stays at or below 10% of the entire asset holding, according to the published proposal. Fund managers would also need to show that any ETN holdings align with the fund’s stated investment objective and risk profile.
The FCA has set a 10% cap to limit risk exposure and prevent funds from being pushed into “restricted mass market investment” territory at higher allocation levels, which could complicate their regulatory classification as retail products.
Based on the proposal plan, funds will be permitted to hold crypto ETNs listed on recognized investment exchanges in the UK. Products traded in the EU and other global markets that satisfy existing market criteria for eligibility are also expected to qualify for listing.
Possible proposal benefactors
The proposal covers a wide scope of financial institutions and investment funds, but still has clear boundaries on who it applies to and who it doesn’t. Some investment schemes serving professional investors and individuals with a high net worth would face no allocation cap.
Long-term asset funds and non-UCITS retail schemes structured as alternative investment funds would be excluded entirely from holding crypto ETNs.
However, the FCA’s stance on direct crypto ownership has not changed in the slightest. Ownership of cryptocurrency by these funds is still off the table. Funds can gain exposure only through listed and approved crypto ETNs.
The FCA said it would revisit that position after assessing how its forthcoming crypto regulatory framework and client-asset protection rules affect fund structures.
UK crypto ETN market
The recent proposal comes after a sequence of shifts in the regulatory market, with the FCA lifting its ban on retail investors accessing crypto ETNs in October 2025, a change that reopened a market that had been closed for four years. Financial institutions, including 21Shares, Bitwise, WisdomTree, and BlackRock, then listed physically backed Bitcoin and Ether products on the London Stock Exchange.
In April 2026, British investors became allowed to hold crypto ETNs in Innovative Finance ISAs after the HMRC had previously blocked new acquisitions within conventional stocks-and-shares ISAs.
The current proposal addresses what the FCA sees as a regulatory gap, as individual retail investors could already access crypto ETNs directly but the funds managing their money could not.
Jon Allen, head of innovation and operations at the Investment Association, called the proposal “a practical step” that would let funds gain crypto exposure through regulated ETN products.
This move from the UK FCA is on track with recent trends across Europe, where regulators in Germany, Switzerland, and the Netherlands have already allowed similar financial products for investment funds.
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