UK FCA Proposes Allowing Investment Funds to Hold Crypto ETNs with 10% Cap

The UK Financial Conduct Authority (FCA) has suggested that authorized investment funds, such as UCITS and most non-UCITS retail schemes, be permitted to invest up to 10% of their portfolios in crypto exchange-traded notes (ETNs). This recommendation is detailed in the FCA's 52nd quarterly consultation paper, which invites public feedback until July 13, 2026. While qualified investor schemes will have no limit, long-term asset funds and specific non-UCITS alternative investment funds will be excluded. Fund managers are required to ensure that crypto ETN investments align with the fund's objectives and to disclose significant exposure. The FCA clarified that this is a cautious approach, not a validation of crypto as a mainstream asset, due to the speculative nature of the assets involved. This initiative follows the FCA’s decision in August 2025 to lift a four-year ban on retail crypto ETN sales, leading to listings by BlackRock, 21Shares, Bitwise, and WisdomTree on the London Stock Exchange in October 2025. In April 2026, crypto ETNs became eligible for Innovative Finance ISAs. The Investment Association endorsed the proposal, with John Allan describing it as "a sensible and pragmatic step." Currently, the FCA is not considering the allowance of direct crypto asset holdings like Bitcoin. In February 2026, Luxembourg's CSSF implemented a similar 10% limit, while Ireland’s Central Bank has adopted a more cautious approach.