The UK Financial Conduct Authority has proposed a new rule that would let authorized investment funds put up to 10% of their assets into crypto exchange-traded notes, or ETNs. If adopted, the change would give retail investors a regulated way to gain indirect exposure to assets such as Bitcoin and Ether through investment funds.
Authorized funds would be allowed limited crypto exposure
The proposal covers UCITS funds and some non-UCITS funds. In its consultation paper, the FCA said the 10% ceiling is meant to preserve a conservative asset limit while allowing those funds to remain eligible for marketing to retail investors. The cap is tight. Still, it would open a formal route for crypto-linked exposure inside mainstream fund structures.
The regulator also said a retail fund would need to show that any crypto allocation is consistent with the fund’s stated investment objective and risk profile. According to the FCA, authorized funds should keep pace with investor demand while maintaining consumer protection and orderly market conditions.
A gap between direct access and fund access is narrowing
Earlier this year, in August, the FCA lifted restrictions on retail investors trading crypto ETNs. This new proposal extends that approach to the fund layer. Retail investors could already buy these products directly, but funds were still blocked from adding them to portfolios. That mismatch may now be removed.
Unregulated funds and qualified investor funds would not be subject to the same 10% cap. Those vehicles can invest in more speculative assets, though their distribution remains limited to institutions and qualified investors.
Part of a wider UK push on crypto rules
This is one of several crypto-related regulatory steps taken in the UK this year. In April, the FCA introduced rules for tokenized funds to make it easier for asset managers to use blockchain technology. In May, the Bank of England adjusted its stablecoin framework, including limits on crypto company holdings and reserve requirements. In June, the FCA opened consultations on stablecoin issuance, crypto trading, custody, and staking guidance.
Last week, the House of Lords also warned that overly strict stablecoin rules could leave pound-backed stablecoins commercially unviable. The policy direction is becoming more active, and the details are still being shaped.
Consultation runs for five weeks
The public consultation lasts for five weeks and closes on July 13. If the proposal is approved, the UK would move toward becoming one of the first G7 markets to let retail money access crypto exposure through authorized funds under a clearly defined allocation cap.