UK funds could hold crypto ETNs — but only up to 10%

What’s changing — a crypto sleeve with a 10% leash

The UK regulator is proposing a tweak that would let many retail-authorized funds sneak a little crypto exposure into their portfolios — but only through exchange-traded notes (ETNs) tied to crypto prices, and only up to 10% of the fund’s property. In plain English: funds could buy securities that track crypto, but they still can’t go stuffing actual coins into the vault.

This would apply to UCITS funds and most non-UCITS retail schemes at the scheme-property level, meaning a fund’s total allocation to transferable securities that are crypto ETNs would be capped at 10%. Qualified investor schemes aimed at professional clients sit outside this retail cap. Some fund types — like certain long-term asset vehicles and permitted funds that operate as funds of alternative investment funds — are likely to be barred from holding these ETNs, and the regulator wants feedback on those limits. The public consultation closes on July 13, 2026.

Why this matters (and what managers will have to do)

Think of the rule as a tiny bridge between mainstream managed funds and the wild west of crypto. It lets managers add a small satellite allocation of crypto-linked notes if the exposure matches the fund’s stated objective and risk profile. But the leash is short: direct holdings of cryptocurrencies like Bitcoin or Ether remain out of bounds for authorized funds.

Fund teams would need to do the boring-but-important homework: due diligence on the ETNs, clear disclosure in prospectuses and consumer-facing docs, volatility warnings for UCITS where appropriate, and checks that the notes stay liquid even in stressed markets. The new permission leans on existing rules around objectives, marketing, Consumer Duty and risk summaries, so managers will also be judged on suitability, governance, and how the crypto sleeve fits into the broader portfolio (especially alongside other higher-risk assets).

There are practical constraints, too. Retail consumer protections remain strict: these ETNs would keep their high-risk label, would not sit under the Financial Services Compensation Scheme, and retail derivatives restrictions still stand. All of that makes adoption a cost-benefit call for platforms, depositaries and distributors as much as for asset managers.

In short: the proposal nudges crypto further into regulated fund plumbing without letting it roam free. If managers bite, we could see modest, controlled crypto allocations inside mainstream funds. If they don’t, the rule will be more symbolic — a policy step that normalizes the structure but doesn’t change many portfolios in practice.