UK FCA Just Opened a 10% Crypto Door for Funds

FCA Adds 10% cETN Cap

The key number is the proposed 10% limit. In the CP26/17 PDF, the draft rule says not more than 10% in value of scheme property may consist of transferable securities that are cryptoasset exchange traded notes.

That structure matters because a crypto ETN is not the same as holding bitcoin or ether directly. An ETN is a listed security that references an asset, with issuer, custody, listing and disclosure requirements sitting between the fund and the underlying crypto market.

The FCA said UCITS schemes and NURS can technically invest in transferable securities backed by ineligible assets under older rules that predate widespread crypto adoption. Until now, the regulator said it had challenged proposed cETN investment by asking how the holding matched a fund’s objective and how managers would disclose the risks.

The consultation would make that route more explicit. Fund managers would still need to decide whether cETN exposure fits the fund’s investment policy, liquidity profile, target market and overall spread of risk.

Daily Crypto Briefs has tracked the same institutional-access theme in the United States, including T. Rowe Price’s active crypto ETF filing and Morgan Stanley’s multi-asset crypto ETF filings. The UK proposal differs because it is about authorised funds buying ETNs as portfolio assets, not launching standalone spot crypto funds.

UK Retail Fund Door Widens

The practical effect would be distribution. If finalised, the rule could put small crypto ETN exposure inside familiar fund wrappers, instead of requiring retail investors to buy the notes directly through a brokerage account.

The FCA is not treating that as risk-free. CP26/17 says many cryptoassets and cETNs are liquid, but fund managers should consider whether that will remain true in stressed scenarios. It also tells managers to assess cETNs alongside other high-risk assets, indirect crypto exposure and assets correlated with crypto, such as treasury issuers.

The approach sits between prohibition and unrestricted access. It keeps a retail fund exposure cap for UCITS and NURS, proposes no cETN limit for qualified investor schemes because they are not mass-marketed to retail clients, and seeks views on prohibiting long-term asset funds and NURS operating as funds of alternative investment funds from holding cETNs.

That is more cautious than some crypto advocates want, but it is also a shift from the FCA’s previous posture. The regulator banned the sale of crypto derivatives and ETNs to retail consumers in 2021, then reopened UK-listed retail crypto ETN access in 2025.

For search demand, the story has a clean hook: UK funds, crypto ETNs and 10%. It also connects to a broader European access debate after Daily Crypto Briefs covered how European banks have moved further into crypto products under a more defined regulatory framework.

Fund Managers Face July Deadline

The next step is not implementation. The FCA is asking for feedback by July 13, 2026, for Chapters 2 to 7, including the crypto ETN fund proposal.

The open questions are specific. The FCA asks whether respondents agree that UCITS schemes and NURS should be allowed to hold cETNs, whether the 10% limit is appropriate, and whether LTAF and FAIF structures should be prohibited while qualified investor schemes remain uncapped.

Disclosure will be one pressure point. The FCA said possible or intended exposure to cETNs beyond a genuine de minimis level would likely be a relevant feature of a UCITS or NURS strategy.

That matters in a market still showing extreme caution.

The proposal does not remove crypto volatility, issuer risk, custody risk or investor-suitability questions. It does show the FCA is willing to integrate listed crypto products into mainstream fund rules when exposure is capped, disclosed and routed through regulated securities markets.

The immediate watch item is the consultation response process. If asset managers, depositaries, platforms and cETN operators support the framework, the final rule could become a route for limited crypto exposure inside UK retail funds. If objections focus on suitability, liquidity or fund-brand risk, the 10% proposal could still narrow.