The Monetary Conduct Authority’s landmark proposal would open a regulated pathway for mainstream UK funds to realize crypto publicity — however with strict limits hooked up
The UK’s monetary watchdog has proposed a big shift in its strategy to cryptocurrency investing, one that might carry digital asset publicity into mainstream funding funds for the primary time.
The Monetary Conduct Authority (FCA) has put ahead plans to permit licensed funding funds — together with broadly used UCITS schemes and most non-UCITS retail schemes — to allocate as much as 10% of their portfolios to crypto exchange-traded notes (ETNs). The proposal, revealed as a part of the FCA’s 52nd quarterly session paper, is open for public remark till July 13.
What Are Crypto ETNs and Why Does This Matter?
Crypto exchange-traded notes are monetary devices listed and traded on regulated inventory exchanges that monitor the worth of a cryptocurrency — mostly Bitcoin or Ethereum — with out requiring buyers to carry the digital asset straight. Consider them as a regulated, exchange-listed wrapper round a crypto funding.
Till lately, UK retail buyers couldn’t entry these merchandise in any respect. The FCA solely lifted a four-year prohibition on promoting crypto ETNs to particular person retail buyers in August 2025, a transfer framed as a part of a broader effort to assist UK development and competitiveness.
However even after that change, there was a notable hole within the guidelines: licensed funding funds — the professionally managed swimming pools of capital that hundreds of thousands of peculiar savers use — had been nonetheless successfully barred from holding them. The brand new proposal is designed to shut that hole.
Execs and Cons of Trade-Traded Notes (ETNs) (Supply: Coinpedia)
What Precisely Is Being Proposed?
Beneath the FCA’s plan:
UCITS funds and most non-UCITS retail schemes can be permitted to carry crypto ETNs, however solely as much as a ten% ceiling of the fund’s complete belongings. The regulator has been deliberate about this cover. Permitting materials publicity past that threshold might set off a reclassification of funds as “restricted mass-market investments,” which might complicate their standing as customary retail merchandise.
Certified investor schemes (QIS) — funds restricted to skilled and complex buyers — would face no such ceiling beneath the proposal, reflecting the belief that skilled buyers are higher geared up to handle greater ranges of threat.
Lengthy-term asset funds (LTAFs) and non-UCITS retail schemes working as various funding funds can be excluded from holding crypto ETNs completely. The FCA mentioned it doesn’t view cryptocurrencies as in keeping with the funding goals of those specific constructions.
Fund managers would even be required to exhibit that any crypto ETN holdings align with a fund’s disclosed funding goals and threat profile. Any publicity past a minimal, token quantity would must be disclosed as a cloth function of the fund’s technique.
The Regulatory Logic Behind the ten% Restrict
The FCA has been cautious to border this as a measured step, not an endorsement of crypto as a mainstream asset class. Within the session paper, the regulator said plainly that it doesn’t imagine it might be applicable to permit funds vital publicity to crypto ETNs “given the speculative nature of the underlying crypto belongings.”
The ten% determine can also be notable in a world context. Luxembourg’s monetary regulator, the CSSF, made the same transfer in February 2026 — additionally setting a ten% oblique crypto publicity restrict for UCITS funds. That call was partly pushed by the popularity that retail buyers have already got direct entry to digital belongings, and that demand from fund managers was constructing. Though no crypto-exposed ETFs have but launched in Luxembourg on the again of the rule change, a number of asset managers are reported to be exploring tips on how to incorporate the asset class.
Distinction that with Eire’s Central Financial institution, which oversees Europe’s largest ETF domicile and has taken a notably extra cautious place. A senior official lately acknowledged the regulator is “watching the world with curiosity” however mentioned there’s “not enough benefit in a rule change in the mean time.”
Business Response
The funding business has broadly welcomed the FCA’s transfer. The Funding Affiliation, the UK’s major asset administration commerce physique, supplied assist for the proposal.
John Allan, Director of the Innovation and Operations Unit, referred to as it “a smart and pragmatic step” that will enable funds to entry crypto publicity by regulated ETNs “inside a well-understood framework.” He argued that the listed, regulated construction of ETNs supplies better transparency than unregulated options, and that the ten% threshold retains dangers appropriately managed.
What the FCA Is Not Proposing
It’s price being clear about what this proposal doesn’t embody. The FCA explicitly said it’s not presently contemplating permitting licensed funds to carry crypto belongings — reminiscent of Bitcoin itself — straight. That query stays on maintain no less than till the regulator has assessed the affect of the incoming broader crypto asset regulatory regime on fund constructions, together with guidelines round how shopper belongings are safeguarded.
Background and Timeline
The proposal builds on a string of incremental steps the FCA has taken to combine crypto into the regulated monetary system. Main issuers together with BlackRock, 21Shares, Bitwise, and WisdomTree listed bodily backed Bitcoin and Ethereum merchandise on the London Inventory Trade shortly after the retail ban was lifted in October 2025. In April 2026, UK buyers additionally gained the power to carry crypto ETNs contained in the tax-efficient Revolutionary Finance ISA wrapper.
The session interval on the newest fund allocation proposal closes on July 13, 2026.
