The United Kingdom's Financial Conduct Authority has proposed permitting authorized investment funds, including UCITS schemes and most non-UCITS retail schemes, to hold up to 10% of their scheme property in crypto exchange-traded notes.
The proposal is part of the FCA's 52nd quarterly consultation paper, and carries a five-week comment window. It targets a regulatory gap between individual retail investors — who gained direct access to crypto exchange-traded notes when the FCA lifted its four-year prohibition in August 2025 — and authorized funds, which the watchdog had maintained an effective bar on despite no formal rule change.
Notably, the FCA said the 10% ceiling is intentional.
The regulator argued that allowing material exposure beyond that threshold could require funds to be reclassified as restricted mass-market investments, thereby complicating their status as mainstream retail products.
Qualified investor schemes, which are limited to professional clients and sophisticated investors, would be subject to no cap under the proposal. Long-term asset funds and non-UCITS retail schemes operating as alternative investment funds would be excluded from holding crypto ETNs entirely, as the FCA said it does not consider cryptocurrencies consistent with those structures' investment objectives.
