FCA may allow crypto ETNs in UK investment funds

The British regulator has again moved the boundary of how crypto can enter traditional investment products. The FCA has proposed allowing certain authorised funds to hold cryptoasset exchange traded notes within 10% of the fund’s asset value. For the market, this is an important signal: it is no longer only about individual retail investor access to crypto instruments, but about including this exposure layer inside the structure of mass-market investment funds.

What exactly the FCA proposes

This is not about direct ownership of cryptocurrency, but specifically about cETNs — exchange-traded notes that provide exposure to cryptoassets. The regulator proposes allowing UCITS funds and NURS to hold these instruments within 10% of the fund’s assets, if this matches the investment objectives and risk profile of the specific product. At the same time, the FCA is not currently considering allowing authorised funds to buy cryptoassets directly.

Why the FCA proposal matters for the retail market

This step shows that the FCA is gradually moving from a strict exclusion policy toward crypto to a controlled access model. If the regulator was previously highly cautious about such products, the logic is now moving further: if certain crypto instruments are already available directly to retail clients, they can also be discussed as part of a diversified fund.

Where the regulator still draws the line

The FCA does not present this as full liberalisation. On the contrary, the regulator directly emphasises the speculative nature of underlying cryptoassets and therefore limits exposure to 10%. Separately, the regulator does not want to open the same regime for all fund types without exception and keeps a stricter approach to products where the risk for the mass-market investor is considered higher.

• the proposal concerns cETNs, not direct cryptocurrency purchases by the fund
• the limit for certain authorised funds is proposed at 10% of assets
• the FCA is trying to combine innovation and consumer protection within one regulatory framework

What this means for the market

For the retail market, this could become a compromise model between innovation and consumer protection. Investors are not being offered to turn the fund into a crypto product, but they are given the opportunity to receive limited exposure through a structure that already exists in a regulated environment. For asset managers, this is also important: the FCA effectively recognises that demand for such instruments exists and wants not to block it completely, but to build it into a managed framework with a clear risk limit and alignment with disclosed objectives.

What is the conclusion for investment funds

The FCA proposal does not make crypto a fully ordinary element of retail funds, but it clearly pushes the market in that direction. If the changes are approved, British authorised funds will be able to receive a limited crypto layer through cETNs, and that is already another level of digital asset integration into traditional investment products. The key point here is not the percentage itself, but the fact that the regulator is already discussing crypto not as an external threat to funds, but as an asset whose access can be dosed and embedded into a mass-market investment product.