UK Regulator Proposes Limited Crypto Exposure for Retail Investment Funds

The UK’s financial regulator has proposed allowing certain retail-focused investment funds to allocate up to 10% of their portfolios to crypto exchange traded notes (ETNs). The move is part of a broader effort to modernize investment rules while maintaining investor protection.

Under the proposal, Undertakings for Collective Investment in Transferable Securities (UCITS) funds and some non-UCITS funds would be permitted to gain limited exposure to crypto products. The regulator said the change would help authorized funds remain aligned with evolving investor demand and international market developments.

10% Crypto Cap Aims to Balance Access and Risk

The proposed 10% limit is designed to provide retail investors with controlled exposure to digital assets while recognizing the speculative nature of cryptocurrencies. Funds seeking crypto exposure would need to demonstrate that such investments match their stated objectives and risk profiles.

The regulator emphasized that significant crypto exposure would not be appropriate for retail-focused products. However, professional and qualified investor funds would not face the same allocation limits, though they cannot be marketed directly to retail clients.

Consultation Period and Broader Crypto Reforms

The consultation will remain open until July 13. The proposal follows a series of UK initiatives covering stablecoins, crypto custody, staking services and tokenized funds, as regulators continue developing a comprehensive framework for the digital asset sector.