UK Proposes 10% Cap on Retail Funds' Crypto Exposure

The UK Financial Conduct Authority (FCA) has proposed a 10% cap on retail funds' crypto exposure, as part of its efforts to align retail access to crypto with international practice. The proposal appears in the FCA's quarterly consultation paper and aims to preserve investor protection while enabling market access.

Retail-focused UCITS funds and certain non-UCITS funds via crypto exchange-traded notes (ETNs) will be subject to this cap, which is described as a conservative restriction. Unregulated and qualified investor schemes may invest more aggressively in crypto or other speculative assets, but such products cannot be marketed to retail investors.

The FCA emphasizes that significant exposure to crypto remains constrained due to its speculative nature. Retail funds would need to ensure crypto holdings align with disclosed objectives and risk profiles, and certain categories of funds, particularly those centered on long-term assets like real estate, may face restrictions on crypto holdings to preserve alignment with their investment objectives.

The consultation runs for five weeks, closing on July 13, as part of a broader UK push to modernize crypto rules. The FCA's move follows the August lifting of the retail ban on crypto ETNs and marks a shift toward greater compatibility with international markets and investor expectations.