The Monetary Conduct Authority’s landmark proposal would open a regulated pathway for mainstream UK funds to realize crypto publicity — however with strict limits connected
The UK’s monetary watchdog has proposed a major shift in its strategy to cryptocurrency investing, one that would deliver digital asset publicity into mainstream funding funds for the primary time.
The Monetary Conduct Authority (FCA) has put ahead plans to permit approved funding funds — together with extensively 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, printed 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 observe the worth of a cryptocurrency — mostly Bitcoin or Ethereum — with out requiring traders to carry the digital asset instantly. Consider them as a regulated, exchange-listed wrapper round a crypto funding.
Till lately, UK retail traders couldn’t entry these merchandise in any respect. The FCA solely lifted a four-year prohibition on promoting crypto ETNs to particular person retail traders in August 2025, a transfer framed as a part of a broader effort to help UK progress and competitiveness.
However even after that change, there was a notable hole within the guidelines: approved funding funds — the professionally managed swimming pools of capital that tens of millions of strange savers use — had been nonetheless successfully barred from holding them. The brand new proposal is designed to shut that hole.
Professionals and Cons of Trade-Traded Notes (ETNs) (Supply: Coinpedia)
What Precisely Is Being Proposed?
Below 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 property. 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 normal retail merchandise.
Certified investor schemes (QIS) — funds restricted to skilled and complex traders — would face no such ceiling below the proposal, reflecting the idea that skilled traders are higher outfitted to handle increased ranges of threat.
Lengthy-term asset funds (LTAFs) and non-UCITS retail schemes working as different funding funds can be excluded from holding crypto ETNs fully. The FCA mentioned it doesn’t view cryptocurrencies as in line with the funding goals of those specific constructions.
Fund managers would even be required to show 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 fabric characteristic 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 acknowledged plainly that it doesn’t imagine it will be acceptable to permit funds important publicity to crypto ETNs “given the speculative nature of the underlying crypto property.”
The ten% determine can also be notable in a global context. Luxembourg’s monetary regulator, the CSSF, made an identical 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 traders have already got direct entry to digital property, 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 learn 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 meanwhile.”
Business Response
The funding business has broadly welcomed the FCA’s transfer. The Funding Affiliation, the UK’s fundamental asset administration commerce physique, supplied help for the proposal.
John Allan, Director of the Innovation and Operations Unit, known as it “a smart and pragmatic step” that might permit funds to entry crypto publicity via regulated ETNs “inside a well-understood framework.” He argued that the listed, regulated construction of ETNs supplies higher 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 acknowledged it isn’t at present contemplating permitting approved funds to carry crypto property — equivalent to Bitcoin itself — instantly. That query stays on maintain not less than till the regulator has assessed the influence of the incoming broader crypto asset regulatory regime on fund constructions, together with guidelines round how consumer property 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 traders additionally gained the power to carry crypto ETNs contained in the tax-efficient Modern Finance ISA wrapper.
The session interval on the newest fund allocation proposal closes on July 13, 2026.
