UK Financial Conduct Authority Proposes Allowing Authorized Funds to Hold Up to 10% in Crypto ETNs

Odaily星球日报讯 The UK Financial Conduct Authority (FCA) has proposed allowing authorized investment funds (including UCITS schemes and most non-UCITS retail schemes) to allocate up to 10% of their assets to crypto exchange-traded notes (ETNs). This proposal is included in the FCA's Quarterly Consultation Paper No. 52, with a five-week public and institutional comment period ending July 13.

The FCA stated that this move aims to bridge the regulatory gap between individual retail investors and authorized funds. Since the FCA lifted its four-year retail ban on crypto ETNs in August 2025, individual investors have been able to invest directly in ETNs, but funds were previously restricted by an "effective ban." The FCA emphasized that the 10% cap is deliberately set; exceeding this threshold could force a fund to be reclassified as a restricted mass-market investment product, affecting its retail fund status.

Under the proposal, professional and qualified investor schemes are not subject to the cap; long-term asset funds and non-UCITS retail schemes operating as alternative investment funds are excluded. The FCA noted that cryptocurrencies are not aligned with the investment objectives of these funds.

On the industry side, the Investment Association supports the proposal, arguing that gaining exposure to crypto assets through regulated listed products is manageable in terms of risk, and that the 10% cap helps manage fund risk. Fund managers must ensure holdings are consistent with the fund's stated investment objectives and risk profile, and disclose significant crypto ETN positions.

The FCA emphasized that it is still not considering allowing authorized funds to directly hold crypto assets for investment purposes. A decision will be made after assessing the impact of the upcoming crypto asset regulatory regime and client asset protection rules. (The Block)