What to know:
- FCA proposes 10% crypto ETNs cap for UCITS and most non-UCITS retail funds in the UK.
- Qualified investor schemes face no cap, while long-term asset funds stay excluded.
- Managers must prove crypto ETN exposure fits fund goals and disclose material holdings.
UK regulators have proposed a limited path for authorized funds to invest in crypto ETNs. The Financial Conduct Authority set a 10% ceiling. The plan would cover UCITS schemes and most non-UCITS retail schemes under its latest quarterly consultation paper.
The proposal is contained in the FCA’s 52nd quarterly consultation paper. It has a five-week comment window. A discussion of the fund allocation plan will end on July 13.
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FCA Targets Crypto ETNs Gap
The measure targets a gap in the UK market. In August 2025, the FCA lifted a 4-year ban on selling crypto ETNs to retail investors, thereby making these products accessible to broader audiences. Even though no rule change had been implemented, the funds were effectively barred.
The FCA said the 10% limit was intentional. It suggested that expanded exposure might compel money to be treated as a mass market investment. This could make the mainstream retail products a little more complicated.
The same cap would not apply to qualified investor schemes. These funds are only available to professional clients and sophisticated investors. Long-term asset funds and non-UCITS retail schemes would still be exempt as alternative investment funds.
According to the regulator, there is no resemblance between the investment objectives of those excluded structures and cryptocurrencies. That role excludes certain fund types from the proposal. It also distinguishes between business products and vehicles designed to be more widely available to retail customers.
The FCA’s plan was supported by the Investment Association. The Innovation and Operations Unit Director John Allan, described the proposal as sensible and pragmatic. Regulated ETNs can play a supporting role in innovation within a familiar structure, he said.
A listed product might provide investors with a more obvious pathway than an unregulated product, said Allan. The 10% limit would also help to keep risk under control, he added. He expressed his support for regulated access to crypto ETNs.
FCA Reviews Fund Access Rules
The plan allowed that securities could be stored in funds that deal in securities traded on investment exchanges recognized by the United Kingdom. They could also use EU and global markets that meet existing eligible market tests. This would allow managers to access markets outside of the UK under the current market standards.
Fund managers would have to demonstrate that the holding fits a fund’s expressed purpose. They also would have to demonstrate that exposure meets the risk profile. FCA stated that any crypto ETNs that are not truly de minimis in nature are considered material and thus should be disclosed.
The proposal came after previous industry queries on authorized fund access. During last June’s consultation on retail access, fund managers, depositaries, and cETN operators raised the issue. In October 2025 the FCA lifted the retail ban.
The big issuers followed shortly after this change. Physically backed Bitcoin and Ethereum products were listed on the London Stock Exchange by 21Shares, Bitwise, WisdomTree, and BlackRock. Their listings revealed the speed with which the crypto ETNs market grew following the alteration in access rules.
UK investors were able to access it tax-free via the Innovative Finance ISA route in April 2026. That came after HMRC ruled that new purchases no longer would qualify for standard stocks-and-shares ISAs. Under the latest proposal, crypto ETNs would now be limited to a capped access for funds that are authorized.
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