The UK’s Financial Conduct Authority (FCA) has unveiled a groundbreaking regulation allowing investment funds to allocate up to 10% of their portfolios to cryptocurrency exchange-traded notes (ETNs). This strategic move is aimed at extending regulated funds’ access to digital assets, setting a new precedent in the investment sector.
How Will the New Rules Work?
Outlined in the FCA’s 52nd quarterly consultation paper, the proposal is subjected to public commentary until mid-July. It mandates that fund managers can integrate crypto ETNs, provided they stay within the specified 10% cap, and must showcase compatibility with the funds’ investment goals and risk parameters.
The FCA stressed that the 10% ceiling is a protective measure to mitigate risk concentration and avoid complexities in classifying funds as retail products with greater crypto exposure.
In detail, funds will have the liberty to include crypto ETNs listed on recognized UK exchanges or those on approved markets within the EU and globally, adhering to pre-existing eligibility standards.
Who is Impacted, and Who is Not?
While the directive encompasses a wide range of investment entities, it distinctly outlines which funds are exempt. Investment schemes targeting professional and affluent investors won’t be constrained by the allocation limit. Conversely, alternative investment funds and certain long-term asset funds are barred from holding crypto ETNs directly. However, they can interact with digital assets indirectly through approved ETNs.
The FCA has indicated potential revisions post-evaluation of the forthcoming crypto regulatory framework’s impact on fund management and investor safeguards.
What’s Happening in the UK Market Now?
This initiative follows significant regulatory changes in the UK’s crypto landscape. The FCA lifted its prohibition on retail access to crypto ETNs in October 2025, revitalizing a sector locked for four years. Leading financial entities have since launched Bitcoin and Ether-backed products on the London Stock Exchange.
- October 2025 marked the end of the retail ban on crypto ETN purchases.
- April 2026 expanded UK investors’ options, allowing crypto ETNs in Innovative Finance ISAs.
Jon Allen from the Investment Association described this regulatory step as a sensible approach, aligning with broader European trends that already permit such investment vehicles.
