UK regulator proposes 10% crypto ETN exposure for mutual funds

The Financial Conduct Authority (FCA) in the United Kingdom has put forth a proposal that would allow specific retail investment funds to allocate up to 10% of their portfolios to cryptocurrency exchange-traded notes (ETNs).

Details of the FCA's Proposal

In its latest quarterly consultation, the FCA suggested that both UCITS (Undertakings for Collective Investment in Transferable Securities) and certain non-UCITS retail schemes (NURS) be authorized to invest in crypto ETNs. These funds function similarly to U.S. mutual funds, being regulated and open-ended structures that pool capital from retail investors for managed investments.

The FCA stated, "Our proposed 10% limit for UCITS and NURS would also mitigate the risk of significant impacts arising from crypto ETN exposure." This initiative marks a significant move towards recognizing crypto exchange-traded products (ETPs) in the U.K., following the FCA's decision to lift a ban on retail investors accessing these funds in October 2025, a restriction that had been in place since 2021.

Investment vehicles that provide exposure to cryptocurrencies without the need for direct ownership have been crucial in promoting wider adoption of crypto. Nevertheless, some analysts warn that persistent regulatory hurdles in the U.K. could undermine its competitive position against other countries in the crypto sector.

Key Highlights:

• FCA proposes a 10% cap on crypto ETN investments for select retail funds.
• UCITS and NURS are akin to U.S. mutual funds and are regulated investment vehicles.
• Concerns arise that regulatory challenges could limit the U.K.'s crypto competitiveness.