FCA Proposes Allowing UK Funds to Hold Up to 10% in Crypto Products

The proposal, published as part of the Financial Conduct Authority's (FCA) latest quarterly consultation paper, marks the next step in the regulator's gradual acceptance of cryptoassets.

In August 2025, the FCA lifted a four-year ban on the sale of crypto cETNs to retail consumers, a prohibition that had been in place since January 2021 following the 2018 crypto market crash. Individual investors have been able to buy cETNs on UK-recognized investment exchanges since October 2025. Authorized funds remained effectively barred despite there being no formal rule change.

Fund access 

Until now, the FCA has challenged any proposed investment in cETNs as it argued the assets didn’t align with the funds’ purpose or capacity to manage risk associated with cryptocurrencies. The new consultation proposes to change that, allowing UCITS schemes (Undertakings for Collective Investment in Transferable Securities, a widely used EU-derived fund structure) and most non-UCITS retail schemes (NURS) to allocate up to 10% to cETNs, provided the investment is consistent with the fund's disclosed objectives and risk profile.

Any allocation beyond 10%, however, could require retail funds to be reclassified as Restricted Mass Market Investments, the FCA wrote in the proposal, undermining the mainstream status of UCITS and retail-authorized fund products.

If the change is made, fund managers would be required to manage the possible risks of being exposed to crypto assets and make clear disclosures to investors wherever cETN exposure goes beyond a minimal level.

Long-term asset funds would be barred from holding cETNs entirely, as the FCA said it does not consider cryptocurrencies consistent with those structures' investment objectives. Qualified investor schemes, which are limited to sophisticated investors, would face no exposure cap.

Gradual acceptance 

After the retail ban was lifted in October 2025, major issuers including 21Shares, Bitwise, WisdomTree and BlackRock listed physically backed bitcoin and ether products on the London Stock Exchange. In April 2026, UK investors gained tax-free access to cETNs via the Innovative Finance ISA route after tax authorities ruled that new purchases could no longer be held inside standard stocks-and-shares Individual Savings Accounts. 

The UK's Investment Association, a trade body for asset managers, has backed the proposal. John Allan, director of the Innovation and Operations Unit,  said that accessing crypto through listed, regulated products offers investors a more transparent route than unregulated alternatives. He noted that the 10% threshold keeps risks appropriately managed.

Direct investment in cryptoassets by authorized funds remains off the table for now, pending the FCA's broader incoming cryptoasset regulatory regime.

The consultation regarding the proposed changes closes on 13 Jul.