UK FCA Proposes Allowing Authorized Funds to Invest Up to 10% in Crypto ETNs

The UK Financial Conduct Authority has proposed allowing authorized investment funds to invest in crypto exchange-traded notes, extending indirect access to digital assets beyond individual investors.

The Block reported on June 8 that the FCA's proposal would let authorized funds allocate up to 10% of their assets to crypto ETNs.

The measure was included in the FCA's 52nd quarterly consultation paper, which will be open for comment for five weeks. It would apply to Undertakings for Collective Investment in Transferable Securities, or UCITS, and most non-UCITS retail funds.

The FCA lifted restrictions on retail investors' access to crypto ETNs in October 2025. The latest proposal would address a regulatory gap that had effectively kept authorized funds from investing even after retail investors were granted direct access.

The FCA set the proposed investment cap at 10%. A higher limit could result in a fund being reclassified as a restricted mass market investment, complicating its standing as a mainstream retail product, the regulator said.

Qualified investor funds aimed at professional investors and high-net-worth individuals would not face a separate cap under the proposal. Long-term asset funds and non-UCITS retail funds structured as alternative investment funds would be barred from holding crypto ETNs.

The UK asset-management industry welcomed the move. Jon Allen, head of innovation and operations at the Investment Association, told The Block it was a practical step that would allow funds to gain crypto exposure through regulated ETNs.

The FCA plans to permit funds to hold crypto ETNs listed on recognized investment exchanges in the UK. Products listed in the European Union and other global markets that meet existing eligible-market requirements could also qualify.

Fund managers would have to demonstrate that holdings of crypto ETNs are consistent with a fund's stated investment objective and risk profile. Exposure above a minimal level would also have to be disclosed as a key feature of the fund's strategy.

The FCA said it is not considering allowing authorized funds to hold crypto assets directly for now. It plans to revisit that position after assessing how the future crypto regulatory framework and client-asset protection rules affect fund structures.

The consultation runs through July 13. The UK is gradually widening access to crypto ETNs in stages, from retail investors to tax-advantaged accounts and now authorized funds.