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

Odaily Planet Daily News The UK Financial Conduct Authority (FCA) has proposed allowing authorised 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). The proposal is included in the FCA's 52nd Quarterly Consultation Paper, with a five-week public and institutional consultation period ending on July 13.

The FCA stated that this move aims to bridge the regulatory gap between individual retail investors and authorised 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 have remained subject to an "effective ban." The FCA emphasised 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 exempt from the cap; long-term asset funds and non-UCITS retail schemes operating as alternative investment funds are excluded. The FCA noted that cryptocurrencies do not align with the investment objectives of these funds.

On the industry side, the Investment Association supports the proposal, stating 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 that holdings are consistent with the fund's stated investment objectives and risk profile, and disclose any material crypto ETN positions.

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