The UK Financial Conduct Authority has proposed allowing qualified portfolio managers to include crypto ETNs in funds, with total exposure capped at 10%. The measure appears in the FCA’s 52nd quarterly consultation paper, and public comments are open until July 13.
Under the draft, fund managers would need to show that any crypto ETN allocation fits the fund’s stated investment objectives and risk profile. The FCA said the 10% ceiling is meant to limit concentration risk and keep funds from moving into a regulatory area that could complicate their classification as retail products if allocations rise too far.
Eligible exposure would be limited to approved listed crypto ETNs
The proposal would allow funds to add crypto ETNs traded on recognized UK exchanges. ETNs listed on approved exchanges in the European Union and other global markets are also expected to qualify, provided they meet existing market eligibility standards.
An ETN, or exchange traded note, is a debt security that trades on an exchange and tracks the return of an asset or index. It can be bought and sold like an ETF, but it also carries issuer credit risk. That remains part of the product structure.
Some funds face the cap, while others stay outside the regime
The proposal covers a broad set of investment firms, but the scope is tightly defined. Certain investment plans aimed at professional investors and high-net-worth individuals would not be subject to the 10% allocation cap.
Long-term asset funds and non-UCITS retail schemes structured as alternative investment funds would be fully excluded from holding crypto ETNs. The FCA also left its position on direct crypto ownership unchanged: those funds still would not be allowed to hold cryptocurrencies directly and could gain exposure only through approved listed crypto ETNs.
The regulator added that it may revisit the position later, after reviewing how the upcoming crypto regulatory framework and investor protection rules affect fund structures.
Proposal follows a series of UK market changes
The draft comes after several shifts in the UK crypto ETN market. In October 2025, the FCA lifted its ban on retail access to crypto ETNs, reopening a market that had been closed for four years. Since then, firms including 21Shares, Bitwise, WisdomTree, and BlackRock have listed physically backed Bitcoin and Ether products on the London Stock Exchange.
By April 2026, UK investors were allowed to hold crypto ETNs in Innovative Finance ISA accounts, after earlier limits had blocked new purchases in traditional stock and investment ISAs. The current proposal is meant to address that mismatch: retail investors can already access these products directly, while funds managing their money still cannot allocate to them.
Jon Allen, head of innovation and operations at the Investment Association, described the proposal as a practical step that would let funds access crypto through regulated ETNs. The report also noted that the approach is in line with parts of Europe, where similar products are already permitted in countries such as Germany, Switzerland, and the Netherlands.