UK Proposes Limited Retail Fund Exposure to Crypto

The UK’s Financial Conduct Authority has proposed allowing some authorized investment funds to hold up to a 10% allocation of crypto exchange-traded notes, closing a regulatory gap between retail investors and funds.

The FCA floated the idea in a quarterly consultation paper on Friday, which would allow retail-focused funds called undertakings for collective investment in transferable securities, or UCITS funds, and some non-UCITS funds to gain exposure to crypto.

The regulator said it wanted authorized funds to “remain contemporary and consistent with the demands of investors” while ensuring consumers “are adequately protected and markets function well.”

The proposal seeks to align rules on who can buy crypto products after the FCA lifted its ban on retail investors being able to trade crypto exchange-traded notes in August, as the regulator looked to align retail access to crypto with other countries.

The FCA said in its consultation that its proposed 10% cap would “set conservative restrictions on assets to which a fund can be exposed, in exchange for allowing these funds to be marketed to retail consumers.”

An excerpt from the FCA’s consultation pitching allowing retail funds limited exposure to crypto products. Source: FCA

The regulator added that it didn’t believe allowing retail-focused funds “to have significant exposure” to crypto products was appropriate, “given the speculative nature of the underlying cryptoassets.”

Related: UK Lords warn BoE could regulate pound stablecoins into irrelevance

Retail funds that want to invest in crypto must also show that the investment is “consistent with the disclosed investment objectives and risk profile of a given fund,” the FCA said.

The proposal said that unregulated and qualified investor schemes could invest in “more speculative assets,” and it would not apply a limit to holdings, but those funds can’t be marketed or sold to retail investors. 

The FCA is also seeking input on whether it should prevent funds centered on holding so-called “long-term assets” such as property and other retail-focused funds from holding crypto exchange-traded notes, arguing that it does not consider crypto to be consistent with the funds’ investment objectives.

The consultation on the proposal will last for five weeks, until July 13.

It comes as the UK has been clearing a path for crypto, with the FCA and Bank of England consulting on proposed rules for stablecoins, crypto custody and staking.

The Bank of England last month said it was reconsidering parts of its proposed stablecoin regime after crypto companies warned that holding caps and reserve requirements could stifle adoption.

In April, the FCA also made new rules for tokenized funds to make it easier for asset managers to use blockchains and sought feedback on guidance to clarify requirements for stablecoin issuance, crypto trading, custody and staking.

Magazine: How crypto laws changed in 2025 — and how they’ll change in 2026