The UK’s financial market regulator, the Financial Conduct Authority, has proposed a new regulation that would allow investment funds to allocate up to 10% of their assets to crypto exchange investment grades. It was stated that the step aims to expand indirect access of regulated funds to digital assets.
The framework of the proposal has become clear
The proposal was published as part of the agency’s 52nd quarterly consultation document. The opinion collection process will end on July 13. Accordingly, portfolio managers of authorized funds will be able to carry crypto ETN positions, provided that the total rate does not exceed 10%. Fund managers will also need to demonstrate that these instruments are compatible with the fund’s declared investment objective and risk profile.
The FCA revealed that the 10% cap was intended to limit risk concentration and prevent funds being dragged into regulatory territory that could complicate retail product classification at higher allocation rates.
According to the draft, funds will be able to add crypto ETNs traded on well-known investment exchanges in the UK to their portfolios. Products traded in the European Union and other global markets that meet current market eligibility criteria are also expected to be eligible for listing.
Mini glossary: An ETN is an exchange-traded debt instrument that aims to track the return of an asset or index. It is bought and sold similarly to an ETF, but inherently carries issuer risk.
Which funds are included and which are excluded?
Although the proposal covers a wide group of investment institutions, it has clear limits in terms of its field of application. There is no allocation limit for some investment plans that serve professional investors and high-net-worth individuals.
In contrast, long-term wealth funds and non-UCITS retail schemes with an alternative investment fund structure will not be allowed to hold crypto ETNs at all. The FCA’s approach to direct crypto asset ownership has not changed. The funds in question will not be able to receive cryptocurrencies directly; will only be able to establish positions on listed and approved crypto ETNs.
The institution noted that it may reconsider this stance after evaluating the impact of the upcoming crypto regulatory framework and rules for the protection of customer assets on fund structures.
Latest developments in the UK market
The latest proposal follows recent regulatory steps regarding the crypto ETN market in the UK. The FCA lifted the ban on retail investors’ access to crypto ETNs in October 2025, and this area, which was closed for four years, was reopened. Subsequently, financial institutions such as 21Shares, Bitwise, WisdomTree and BlackRock listed physically based Bitcoin and Ether products on the London Stock Exchange.
In April 2026, British investors were allowed to hold crypto ETNs under the Innovative Finance ISA, after new purchases were previously blocked in traditional share and investment ISA accounts. It was reported that the current proposal targets the regulatory gap caused by the fact that while individual investors can directly access these products, the funds that manage their money do not have the same opportunity.
Jon Allen, chief innovation and operations officer at the Investment Association, described the proposal as a practical step that would enable funds to access crypto through regulated ETN products. It is stated that the regulation is also compatible with the European trend that allows similar products in countries such as Germany, Switzerland and the Netherlands.
