FCA proposes 10% crypto ETN cap for UK mutual funds
In brief
- FCA proposes 10% crypto ETN allocation cap for UCITS and retail funds
- Direct Bitcoin and Ether holdings remain prohibited under the proposal
- Retail crypto ETNs gained LSE access in October 2025
- Fund managers must conduct due diligence and align holdings with fund objectives
- Public consultation closes July 13, 2026
The 10% gateway
The FCA's CP26/17 consultation sets out the framework. The limit applies at the scheme-property level, meaning up to 10% of a fund's property could consist of transferable securities that are cryptoasset ETNs. Qualified investor schemes, which are sold to professional clients and sophisticated investors, sit outside the same retail-fund limit.
Long-term asset funds and NURS operating as funds of alternative investment funds face a proposed prohibition on crypto ETN holdings. The distinction reflects the FCA's tiered approach: retail funds get narrow access, while some specialized vehicles get none.
What changed in October
The FCA's earlier decision to open retail access to crypto ETNs traded on UK recognized investment exchanges came into force on October 8, 2025. That shift allowed retail consumers to access crypto ETNs through FCA-approved UK investment exchanges. Crypto ETNs have already become a live UK exchange-traded product category, with London Stock Exchange coverage describing the product segment one year after launch.
It's important to note that retail crypto ETNs sit outside Financial Services Compensation Scheme coverage, and the ban on retail cryptoasset derivatives remains in place. The new proposal doesn't change that protection gap.
Manager responsibility
Fund managers must decide whether a listed note is eligible and whether the exposure fits a fund's objectives, liquidity profile, risk limits, and retail disclosures. The FCA says fund managers should have adequate knowledge and understanding of the assets in which a fund invests and conduct due diligence on investment selection.
Comments on the fund chapter are due July 13, 2026. The consultation period gives the industry time to respond before the regulator finalizes its stance on crypto ETN eligibility within the UK fund framework.
