UK FCA proposes 10% crypto ETN limit for authorized funds

Traders Union
All News
Crypto
FCA 10% crypto ETN fund limit

Highlights

FCA proposes a 10% exposure limit to crypto ETNs for authorized retail funds, aiming to prevent their classification as restricted mass-market investments.
Qualified investor schemes face no crypto ETN cap, while long-term asset funds and non-UCITS retail schemes remain barred from crypto ETN holdings under FCA rules.
Following the FCA’s October 2025 lifting of the retail crypto ETN ban, issuers like 21Shares, Bitwise, WisdomTree, and BlackRock listed products on the London Stock Exchange and tax-free access launched in April 2026.

Consultation sets exposure limits for retail funds

The FCA sets out the proposal in its 52nd quarterly consultation paper, seeking to close a gap that remains after retail investors regained direct access to crypto ETNs in 2025. The regulator says the 10% ceiling is deliberate because higher exposure could push funds into the category of restricted mass-market investments, complicating their standing as mainstream retail products.

Under the plan, qualified investor schemes aimed at professional clients and sophisticated investors would face no cap. Long-term asset funds and non-UCITS retail schemes operating as alternative investment funds would remain barred from holding crypto ETNs, with the FCA saying cryptocurrencies do not fit those structures' investment objectives.

Fund managers would need to show that any crypto ETN position matches a fund's stated investment objectives and risk profile. The FCA also says exposure above a genuinely minimal level must be disclosed as a material feature of the fund's strategy, and it is not currently considering allowing authorized funds to hold crypto assets directly for investment purposes.

Industry backs move as UK market develops

John Allan, director of the Innovation and Operations Unit at the Investment Association, says the trade body welcomes the measure as a pragmatic step that supports innovation within a regulated framework. He says listed and regulated ETNs offer investors a more transparent route to crypto exposure than unregulated alternatives, while the 10% threshold helps keep risks under control.

The FCA says eligible holdings could include crypto ETNs traded on UK-recognized investment exchanges as well as products listed on EU and other global markets that meet existing eligible market tests. The regulator adds that it will keep its position on direct crypto holdings under review until it has assessed the effect of the incoming crypto asset regulatory regime on fund structures, including client asset safeguarding rules.

The proposal follows several recent UK market changes. The FCA lifted its retail ban on crypto ETNs in October 2025, and issuers including 21Shares, Bitwise, WisdomTree and BlackRock then listed physically backed bitcoin and ether products on the London Stock Exchange; in April 2026, UK investors also gained tax-free access to crypto ETNs through the Innovative Finance ISA route after an HMRC ruling on new purchases.

In our earlier coverage of Ingredion’s takeover of Tate & Lyle, we outlined how the £2.7bn all-cash deal would take the FTSE 250 group off the London market and extend the recent run of UK-listed firms going private. We also noted the strategic rationale for both sides, including Tate & Lyle’s pivot toward higher-growth specialty ingredients and the broader pressure this trend has put on London’s equity market.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.