UK regulator proposes 10% crypto ETN limit for mutual funds

The United Kingdom's Financial Conduct Authority (FCA) has proposed allowing certain authorized investment funds to allocate up to 10% of their scheme property to cryptocurrency exchange-traded notes (ETNs). This proposal, detailed in the FCA's 52nd quarterly consultation paper, aims to bridge a regulatory gap for authorized funds, which previously had limited access to crypto-related products compared to individual retail investors.

The proposed 10% ceiling for UCITS schemes and non-UCITS retail schemes (NURS) is intended to prevent these funds from being reclassified as restricted mass-market investments. Qualified investor schemes, however, would not be subject to any cap. The FCA stated that direct cryptocurrency ownership by authorized funds is not currently being considered, though this position will be reviewed.

Fund managers will be required to ensure that any crypto ETN holdings align with a fund's stated investment objectives and risk profile, and must disclose significant exposure. The proposal follows recent regulatory steps in the UK, including the lifting of a ban on retail access to crypto ETNs in October 2025 and the introduction of tax-efficient investment routes via Innovative Finance ISAs in April 2026.

The Investment Association, a UK asset management trade body, has welcomed the proposal, viewing it as a sensible step that supports innovation within a regulated framework and offers investors a more transparent route to crypto exposure.