The UK’s Financial Conduct Authority (FCA) has proposed permitting authorised investment funds — including UCITS schemes and most non-UCITS retail schemes (NURS) — to allocate up to 10% of their scheme property to cryptoasset exchange-traded notes (cETNs).

The move, outlined in the FCA’s latest quarterly consultation, represents another incremental step in integrating digital assets into the UK’s regulated financial system. It builds on the regulator’s decision last October to lift the ban on retail access to certain crypto ETPs.

What the Proposal Means

Under the proposed changes, UK-authorised funds would be able to hold up to 10% of their assets in cETNs that track the price of cryptocurrencies such as Bitcoin. These are unsecured notes issued by banks or financial institutions and traded on recognised UK exchanges, rather than direct holdings or spot ETFs.

The FCA stated the proposal aims to give fund managers greater flexibility to gain indirect exposure to crypto assets where it aligns with their investment objectives and risk profiles.

This limit applies specifically to cETNs and would mark the first time many pooled investment vehicles in the UK could systematically include crypto exposure in their portfolios.

Context and Background

The proposal follows the FCA’s October 2025 decision to allow retail investors access to UK-listed crypto ETPs (initially focused on Bitcoin and Ethereum). That change opened the door for individual investors but stopped short of broad institutional fund access.

UK investment funds collectively manage trillions of pounds in assets. Even a modest 10% allocation cap could unlock significant new capital flows into Bitcoin and other crypto products over time, particularly from pension funds, wealth managers, and retail schemes.

Industry observers note that while the 10% limit is conservative compared with some other asset classes, it provides a clear regulatory framework that many fund managers have been seeking.

Market and Industry Reaction

The announcement has generated widespread discussion across crypto and traditional finance circles:

• Positive views highlight it as a structural step toward mainstream adoption, potentially bringing steady institutional demand.
• Some Bitcoin purists and commentators emphasised that the proposal refers to Bitcoin and crypto ETNs, not necessarily broader “crypto” exposure.
• Critics pointed out that it remains a proposal at consultation stage (feedback deadline around mid-July 2026) rather than final approved rules.
• Others welcomed the measured approach, noting it balances innovation with investor protection.

Bitcoin’s price has remained relatively stable in the low-to-mid $60,000s amid the news, with traders viewing the development as longer-term bullish rather than an immediate catalyst.

Implications for UK Investors and Funds

If implemented, the changes could:

• Allow more diversified portfolios for UK savers and pension holders.
• Increase liquidity and product development around UK-listed crypto ETPs.
• Position the UK as a more competitive jurisdiction for digital asset integration compared with some peers.

Fund managers will still need to conduct due diligence on volatility, custody, and risk management before allocating.

Next Steps

The FCA is seeking feedback on the proposals as part of its quarterly consultation process. Final rules, if approved, would likely come into effect later in 2026 or early 2027, depending on responses received.

This development continues the UK’s gradual, rules-based approach to crypto regulation — prioritising consumer protection while slowly expanding access for both retail and institutional participants.

CoinReporter UK will continue to monitor the consultation process and provide updates as more details emerge from the FCA.