UK Regulators Propose 10% Crypto Allocation for Retail Funds

The UK's Financial Conduct Authority (FCA) has proposed allowing authorized retail investment funds to hold up to 10% of their assets in crypto exchange-traded notes. This move would bring crypto exposure into the mainstream investment fund universe for the first time in the United Kingdom.

The proposal was floated in the FCA's quarterly consultation paper published Friday and applies to undertakings for collective investment in transferable securities (UCITS funds) as well as some non-UCITS retail-focused funds. The five-week consultation period runs until July 13.

Under the proposed framework, retail-focused authorized funds could gain exposure to crypto ETNs up to a 10% cap, provided the investment is consistent with the fund's disclosed investment objectives and risk profile. The FCA described this as setting 'conservative restrictions on assets to which a fund can be exposed, in exchange for allowing these funds to be marketed to retail consumers.'

The regulator emphasized that it does not believe allowing retail funds to have 'significant exposure' to crypto products is appropriate 'given the speculative nature of the underlying cryptoassets.' It framed the 10% limit as a floor for protection rather than a ceiling on ambition.