London, June 8, 2026 | The UK's Financial Conduct Authority has proposed allowing authorized investment funds, including retail-facing UCITS and non-UCITS schemes, to allocate up to 10% of their holdings to crypto exchange-traded notes (cETNs), closing a regulatory gap that had kept collective investment vehicles on the sidelines even as individual retail investors gained direct access to the same products eight months ago.

The proposal is contained in CP26/17, the FCA's 52nd Quarterly Consultation Paper, published today. The comment period closes July 13, 2026.

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What the Proposal Covers

The 10% cap would apply to UCITS schemes (a widely used fund structure sold across the UK and Europe) and most non-UCITS retail schemes. Qualified Investor Schemes, which serve professional and sophisticated clients, would face no allocation ceiling at all under the draft rules.

Not every fund type is included. Long-term Asset Funds (LTAFs) and non-UCITS retail schemes structured as alternative investment funds would be barred from holding cETNs entirely. The FCA stated that crypto exposure is incompatible with the investment objectives of those vehicles.

The 10% ceiling is also a structural safeguard. Funds that exceed it risk reclassification as Restricted Mass Market Investments, a designation that would complicate their standing as standard retail products. The FCA has also been explicit that it is not considering allowing authorized funds to hold crypto assets directly. Any cETN a fund holds must be listed on an FCA-recognized investment exchange, such as the London Stock Exchange or Cboe UK.

The UK's Investment Association, the principal trade body for domestic asset managers, publicly backed the proposal.

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How the UK Got Here

The FCA banned the sale, marketing, and distribution of crypto derivatives and ETNs to retail clients in January 2021, citing concerns about their suitability for retail investors. That position held for nearly five years.

In June 2025, FCA Executive Director David Geale signaled a policy shift. "We want to rebalance our approach to risk and lifting the ban would allow people to make the choice on whether such a high-risk investment is right for them," he said. By August 2025, the FCA had formally announced the retail ban would be lifted, and on October 8, 2025, it came into effect.

Within days, BlackRock, 21Shares, Bitwise, and WisdomTree listed physically backed Bitcoin and Ether products on the LSE. Fees ranged from 0.05% (Bitwise's Bitcoin Core ETP) to 0.35% (some WisdomTree products). BlackRock's US iShares Bitcoin Trust, a useful reference for institutional appetite, now holds $85.5 billion in net assets.

The October 2025 rule change covered individual investors buying through brokerages. Authorized collective funds, which pool capital from many investors under a single regulated structure, were not addressed at that time. CP26/17 targets that gap directly.

One additional complication has emerged on the tax side. Since April 6, 2026, HMRC no longer allows new cETN purchases inside standard Stocks and Shares ISAs. Investors must now use Innovative Finance ISAs instead. That change affects how retail investors hold cETNs directly but operates under a separate HMRC framework from the fund-level rules proposed today.

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Market Context

The proposal arrives during a significant crypto market correction. The total crypto market capitalization has fallen approximately 48% from its cycle peak, with Bitcoin recording sharp losses over the prior trading week. That context matters: the FCA is extending institutional access to this asset class at a point of depressed valuations, not at the height of speculative activity.

UK retail adoption has grown sharply in the background. Roughly 12% of British adults now hold cryptocurrency, compared to 4% in 2021 when the original ban was enacted. A survey conducted by a trading platform found that 30% of UK adults expressed interest in cETNs, with that figure rising to 50% among 18 to 24-year-olds.

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Why This Matters Beyond the UK

For investors across South Asia and Africa, the FCA's graduated framework carries both direct and indirect relevance.

The UK is home to more than 1.7 million people of Indian origin, many of whom invest through UCITS-compliant funds via pension wrappers or ISAs. A 10% cETN allocation within those funds creates a passive crypto exposure pathway that does not require opening a separate crypto exchange account. India's own regulatory architects are watching closely. India leads the 2026 Global Crypto Adoption Index at the grassroots level but lacks institutional fund infrastructure for crypto. The FCA's sequencing, starting with professional investors, then retail investors, and now collective fund vehicles, offers a policy template that India's SEBI-RBI framework could adapt.

In Africa, where crypto adoption grew 52% year-over-year heading into 2026, the impact is more structural. South Africa, Nigeria, and Kenya rank among the world's highest adoption markets, and all three countries' regulators have tracked international precedents closely. Kenya, which enacted a virtual asset law in October 2025 and records approximately $900 million in monthly trading volume, illustrates the pace of regulatory development across the continent. The FCA's ETN-first approach, which keeps direct crypto holdings out of authorized funds while allowing listed, custodied instruments, offers a conservative model that regulators in Johannesburg, Abuja, or Nairobi could cite when building equivalent rules.

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A Note for Developers and Web3 Builders

For those building in the crypto and Web3 space, a key distinction applies to this proposal. cETNs are centralized debt instruments settled off-chain and held in traditional custodial arrangements. This proposal creates no new pathway for on-chain access to crypto assets within regulated fund structures. Authorized funds still cannot hold crypto directly, and the vehicles described here have no interaction with decentralized protocols or on-chain settlement layers.

A separately relevant development is FCA Policy Statement PS26/7 on fund tokenization, published in April 2026, which sets out the FCA's approach to the longer-term arc toward on-chain fund settlement. For teams building infrastructure at that intersection, PS26/7 is the more immediately applicable policy document.

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What Comes Next

The consultation window closes July 13, 2026. If finalized, the rules would represent one of the more significant expansions of institutional crypto access in the UK since the retail ban was lifted. A broader regulatory milestone sits on the horizon as well. The Financial Services and Markets Act 2000 (Cryptoassets) Regulations 2026, passed by Parliament on February 4, 2026, brings cryptoassets formally under the FCA's regulatory perimeter starting October 25, 2027. Crypto firms can begin applying for FCA authorization from September 2026, with the application window running through February 28, 2027. The fund proposal sits inside a much larger regulatory construction project, and for asset managers, developers, and diaspora investors watching from Lagos, Mumbai, or Nairobi, the direction of travel is now considerably clearer.