The UK's Financial Conduct Authority floated allowing authorized retail investment funds to hold up to 10% in crypto exchange-traded notes — closing a regulatory gap between individual investor access and fund-level crypto exposure.
In a quarterly consultation paper published Friday, the FCA proposed allowing UCITS funds — undertakings for collective investment in transferable securities — and select non-UCITS retail funds to gain exposure to crypto through exchange-traded notes (ETNs). The 10% cap would apply to any retail-facing fund that wants to include crypto among its holdings.
The proposal does not apply to unregulated or qualified investor schemes, which would face no crypto allocation limit — but those funds cannot be marketed to retail consumers. The FCA said it wants authorized funds to "remain contemporary and consistent with the demands of investors" while ensuring consumers "are adequately protected."
Key rule: Funds must demonstrate crypto exposure is "consistent with the disclosed investment objectives and risk profile" of the fund. The 10% cap is designed as a conservative entry point, not a ceiling for future expansion.
The proposal follows a series of regulatory moves that signal the UK is building a coherent, permissive framework for digital assets. In August 2025, the FCA lifted its ban on retail investors trading crypto ETNs. In April 2026, the regulator issued new rules for tokenized funds and sought feedback on stablecoin issuance, crypto custody, and staking guidance.
The Bank of England last month walked back parts of its proposed stablecoin regime after pushback from industry over holding caps and reserve requirements. Taken together, the signals point to UK regulators actively calibrating rules to avoid pricing out institutional crypto activity — a lesson drawn partly from EU MiCA, which critics including Ledger CTO Charles Guillemet have called prohibitively slow for startups.
UCITS funds are a significant distribution channel for retail capital across Europe. Allowing these vehicles to hold crypto ETNs doesn't just open a new investor class — it creates demand for the custody, settlement, and tokenized infrastructure that sits underneath that exposure. As noted in Ripple's UK digital capital markets push, the UK regulatory track record is increasingly a tailwind for XRPL-based payment and settlement infrastructure.
The consultation window runs for five weeks, closing July 13, 2026. If adopted, it would represent one of the most structurally significant retail crypto access events in a major economy since the US SEC approved spot Bitcoin ETFs.
The FCA's consultation seeks responses on whether long-term asset funds and other specialized retail vehicles should also be excluded from holding crypto ETNs — suggesting the regulator is still calibrating where the boundaries sit. Final rules, if they follow the pattern of recent FCA crypto consultations, could take 6–9 months from close of consultation to implementation.