The UK Financial Conduct Authority (FCA) proposed on Tuesday allowing certain investment schemes to allocate up to 10% of their assets to crypto exchange-traded notes (ETNs). The move, outlined in a consultation paper, would open a new channel for mainstream funds to gain exposure to digital assets without directly holding them. It’s the first time the regulator has set a formal cap for such allocations.
What the proposal covers
The FCA’s plan targets what it calls “certain investment schemes” — a category that typically includes unit trusts, open-ended investment companies (OEICs), and other authorised funds that seek FCA approval. Under the proposal, these funds could invest up to a tenth of their portfolio in crypto ETNs, which track the price of bitcoin or ether and trade on venues like the London Stock Exchange. The consultation stipulates that the ETNs must be listed on a recognised exchange and issued by an approved counterparty.
The regulator emphasised that the cap is meant to manage risk. Funds would still need to comply with existing diversification rules and conduct their own due diligence on the underlying assets.
Why now?
The FCA has been cautious about crypto products for years. It banned crypto derivatives for retail investors in 2020 and has repeatedly warned about volatility and consumer harm. But the tone has shifted. In early 2024, the FCA began allowing professionally-managed firms to trade crypto ETNs, and now the door is opening a bit wider for the broader fund world.
The timing isn’t accidental. The consultation arrives as the UK government pushes to become a “global cryptoasset hub.” Treasury officials have been working on a comprehensive regulatory framework, and the FCA’s proposal fits neatly into that agenda.
What happens next
The FCA is accepting feedback on the plan until September 15, 2026. If adopted, the rule change would take effect in early 2027. Industry reaction has been mixed so far. Some fund managers welcome the chance to diversify and offer clients a regulated crypto product. Others worry the 10% ceiling is still too high for funds that cater to conservative savers.
One unresolved question is whether the FCA will later extend the allowance to exchange-traded funds (ETFs) or other crypto-linked instruments. For now, the regulator has kept the scope narrow. But the consultation explicitly leaves the door open to expand it based on market feedback.
The next concrete deadline is the September feedback cut-off. After that, the FCA is expected to publish its final rules before the end of the year.
