Catenaa, Monday, June -08, 2026- The United Kingdom’s Financial Conduct Authority has proposed allowing authorized investment funds to invest up to 10% of their assets in crypto exchange-traded notes, expanding regulated access to digital assets while maintaining limits designed to protect retail investors.
The proposal, published as part of the regulator’s latest quarterly consultation paper, would permit UCITS funds and most non-UCITS retail schemes to gain exposure to cryptocurrency markets through regulated exchange-traded products rather than direct ownership of digital assets.
If adopted, the measure would close a regulatory gap that emerged after the FCA lifted restrictions on retail investors purchasing crypto exchange-traded notes in 2025 while continuing to effectively prevent authorized investment funds from holding similar products.
The consultation remains open until July 13.
The proposal represents another step in the UK’s gradual integration of digital assets into mainstream financial markets.
Under the plan, authorized retail funds would be allowed to allocate a maximum of 10% of their assets to crypto ETNs traded on recognized UK exchanges and qualifying international markets.
The FCA said the limit was deliberately designed to balance innovation with investor protection.
Regulators argued that higher allocations could fundamentally alter the risk profile of retail investment products and potentially require them to be classified as higher-risk investments.
The proposed framework would still prohibit authorized funds from directly purchasing cryptocurrencies such as Bitcoin or Ethereum.
Not all investment vehicles would receive identical treatment.
Qualified investor schemes serving professional and sophisticated investors would face no allocation cap under the proposal.
However, long-term asset funds and certain alternative investment structures would remain excluded from investing in crypto ETNs.
The FCA said digital assets are not currently consistent with the long-term investment objectives of those products.
Fund managers would also be required to demonstrate that crypto exposure aligns with their stated investment strategies and risk disclosures.
Any meaningful crypto allocation would need to be clearly communicated to investors.
The proposal received support from parts of the UK asset management industry.
Industry representatives argued that regulated exchange-traded products offer a safer and more transparent route to crypto exposure than unregulated alternatives.
Supporters also noted that exchange-traded notes provide established custody, reporting and compliance frameworks that may reduce operational risks associated with direct cryptocurrency ownership.
The FCA’s proposal follows increasing institutional interest in digital asset investment products across Europe and North America.
The UK crypto ETN market has expanded rapidly since regulators began easing restrictions.
The FCA lifted its ban on retail access to crypto ETNs in late 2025, opening the market to broader participation.
Major asset managers including BlackRock, Bitwise, WisdomTree and 21Shares subsequently launched physically backed Bitcoin and Ethereum products on the London Stock Exchange.
In April 2026, UK investors also gained tax-efficient access to crypto ETNs through the Innovative Finance ISA framework following changes to tax treatment rules.
Those developments have helped position London as an increasingly important hub for regulated digital asset products.
The proposal comes as financial centers worldwide compete to attract digital asset investment activity.
European regulators continue implementing the Markets in Crypto-Assets framework, while US regulators are advancing legislation covering stablecoins, market structure and digital asset oversight.
The UK’s approach has largely focused on integrating crypto exposure through familiar financial products rather than permitting unrestricted access to digital assets.
Officials argue that regulated investment vehicles can offer investor protections while still supporting innovation.
Crypto exchange-traded notes are debt securities that track the performance of underlying cryptocurrencies. Unlike direct ownership, investors gain exposure through regulated financial instruments listed on stock exchanges.
The FCA has maintained a cautious approach toward cryptocurrency markets for several years, citing concerns about volatility, consumer protection and market integrity.
However, the regulator has gradually eased restrictions as market infrastructure, custody standards and compliance frameworks have matured.
The current proposal signals growing confidence among UK regulators that limited crypto exposure can be incorporated into mainstream investment products without undermining investor protections.
If approved following consultation, the change would represent one of the most significant expansions of regulated crypto access for UK retail investment funds to date.
