U.K. to Allow Mutual Funds 10% Exposure to Crypto

The U.K. Financial Conduct Authority is moving to allow mutual funds up to 10% exposure to crypto assets, a regulatory shift that would mark one of the most significant openings for digital-asset access within the country’s regulated investment industry.

The proposal appears in a consultation paper published by the FCA, which outlines conditions under which authorized funds could allocate a portion of their portfolios to cryptoasset-linked instruments. The cap would apply to indirect exposure through vehicles such as crypto exchange-traded notes, not direct holdings of tokens.

What the 10% Cap Covers and Which Funds It Affects

The rule change targets U.K.-authorized mutual funds, including unit trusts and open-ended investment companies. Fund managers would be permitted to hold up to 10% of a fund’s net asset value in eligible crypto-linked products, subject to risk management and disclosure requirements.

This follows the FCA’s earlier decision to lift its ban on crypto exchange-traded notes for professional investors. That move reopened access to listed crypto products on U.K. venues after a blanket retail ban had been in place since 2021.

The new consultation goes further by extending access into the mutual fund wrapper, which is widely used by retail investors and pension schemes. ETNs on their own reach a narrower audience, while mutual funds sit at the core of U.K. savings and retirement portfolios.

Why This Matters for Crypto Investment Access

The U.K. had taken a notably cautious stance on retail crypto exposure compared to jurisdictions like the United States, where spot Bitcoin ETFs launched in early 2024. By proposing a regulated pathway through mutual funds, the FCA is signaling a measured but meaningful shift.

For asset managers, the 10% ceiling creates a framework to offer diversified funds with a crypto component without requiring investors to open accounts on digital-asset exchanges. This could appeal to investors who have watched developments like the FCA’s recent opening of retail access to crypto ETNs but prefer the protections of a regulated fund structure.

The move also has implications for the broader digital-asset industry in the U.K. Projects focused on token wallet security and privacy-preserving blockchain features stand to benefit from a larger pool of regulated capital entering the market. Even emerging projects exploring novel crypto investment structures could see increased institutional interest as fund managers seek eligible assets.

Key Limits, Risks, and Next Steps to Watch

The 10% cap is a ceiling, not a mandate. Individual funds could set lower internal limits, and compliance teams will need to account for the volatility and liquidity characteristics of crypto-linked instruments when constructing portfolios.

The proposal remains in consultation, meaning the FCA is soliciting industry feedback before finalizing the rule. Fund managers, custodians, and compliance professionals should monitor the FCA’s consultation paper page for response deadlines and any revisions to the proposed framework.

Investors considering funds that may eventually include crypto exposure should note that the cap does not eliminate risk. The FCA has consistently warned that cryptoassets remain volatile and that consumers could lose their entire investment. Any fund adopting crypto exposure under the new rules would be required to disclose that risk prominently.

The consultation outcome, expected later in 2026, will determine whether U.K. mutual funds can begin allocating to crypto products or whether further guardrails are imposed before implementation.

Disclaimer: This article is for informational purposes only and does not constitute financial or investment advice. Cryptocurrency and digital asset markets carry significant risk. Always do your own research before making decisions.