UK: FCA consults on authorised funds investing in cryptoasset exchange traded notes (cETNs)

Why should I read this?

On 17 June 2026, the FCA published Quarterly Consultation Paper #52 CP26/17. Chapter 5 proposes allowing certain authorised funds to hold cryptoasset exchange traded notes (cETNs) for the first time. 

The proposals follow the FCA’s decision in August 2025 to lift the ban on the sale of cETNs to retail consumers (see FCA Handbook Notice #132, paragraphs 3.57–3.78). The FCA now proposes allowing UK authorised funds to invest in cETNs up to the following limits:

Fund Type	cETN Holding Limit
UK UCITS schemes (UK UCITS)	Up to 10% of scheme property
Non-UCITS retail schemes (NURS)	Up to 10% of scheme property
Qualified investor schemes (QIS)	No limit
Long-term asset funds (LTAFs)	Prohibited
NURS operating as funds of alternative investment funds (FAIFs)	Prohibited

The FCA is not proposing allowing authorised funds to hold cryptoassets directly. 

What do I need to know about crypto ETNs in funds?

The proposals: holding cETNs in authorised funds

Up until now the FCA has maintained an effective prohibition on the holding of cETNs by authorised funds through its authorisation channels. The FCA achieved this by not authorising funds which referenced holding cETNs in its objective and by challenging any proposed investment in cETNs on the basis of how the holding was in line with the investment objectives of a particular fund, and how the manager proposed to capture, manage and disclose the associated risks.

The FCA is consulting on the following rules to:

• permit UK UCITS schemes and NURS to hold cETNs, provided such holdings do not exceed 10% of the value of scheme property. To be eligible, the cETNs must be traded on a UK recognised investment exchange (RIE) or other non-UK markets that comply with the FCA’s existing eligible markets tests; and

• prohibit LTAFs and NURS operating as FAIFs from holding cETNs. The FCA does not consider cryptocurrencies to be consistent with the objectives of these regimes (i.e. to hold long term assets and invest in alternative investment funds, respectively).

Note that the implications of the proposed rules will be that:

• QIS will be able to hold an unlimited number of cETNs (the proposed rules say nothing about any limit on holdings of cETNs by QIS); and

• all holdings of cETNs by funds must be consistent with the disclosed investment objectives and risk profile of the relevant fund (a function of existing requirements, applied in the context of cETNs as an investment class).

The FCA’s rationale

The FCA wants the range of investments for authorised funds to remain up to date and consistent with the demands of investors. UK UCITS and NURS are already permitted to invest in transferable securities backed by ineligible assets under long-standing rules. The FCA believes it is the appropriate time to set a clear framework for cETN holdings.

The FCA considered but rejected calls for higher limits on holdings of cETNs by UK UCITS and NURS. It believes that material levels of cETN exposure could result in funds needing to be classified as restricted mass market investments (RMMIs). This would create tension between the financial promotion rules for direct investments in cryptoassets and the status of UK UCITS (and, more broadly, retail authorised funds) as a brand.

Unregulated funds and QIS can invest in more speculative assets but cannot be mass-marketed to retail investors. Therefore, no limit is being proposed for such funds.

Disclosure and Consumer Duty

The FCA does not propose a specific risk warning for authorised funds holding cETNs. Instead, it will rely on existing rules and guidance on disclosure of fund objectives and investment policies as complemented by the Consumer Duty. The FCA’s risk summaries in COBS 4 Annex 1R for cryptoassets and cETNs may help fund managers decide what to disclose to retail investors about cETN exposure through authorised funds.

For example, fund managers of UK UCITS schemes must ensure that marketing communications for funds with higher volatility include a prominent statement drawing attention to this. The FCA has also made it clear that any possible or intended exposure of a NURS or UK UCITS to cETNs beyond a genuinely de minimis level would need to be disclosed in the description of their investment objective and policy in consumer material.

Direct investment in cryptoassets

The FCA is not currently considering allowing authorised funds to hold cryptoassets directly for investment purposes. This will remain the position at least until the FCA has considered the overall impact of its incoming cryptoasset regulatory regime on authorised funds. 

The FCA’s Policy Statement PS26/7 “Progressing Fund Tokenisation” includes a discussion on the use of stablecoins and cryptocurrencies by authorised funds for non-investment purposes, such as settlement of fund unit deals and payment of transaction charges on public cryptoasset networks. The FCA implicitly considers such holdings as separate to holdings for investment purposes and so not subject to a blanket restriction.

What should I do?

Fund managers should consider the following steps:

• Assess whether your fund range includes UK UCITS, NURS or QIS that might benefit from cETN exposure

Consider whether the investment objectives and risk profile of each fund will be consistent with holding cETNs.

• Review your due diligence processes

Fund managers must have adequate knowledge and understanding of the assets in which a fund invests. They must conduct due diligence on asset selection and monitor investments on an ongoing basis, including liquidity risk in stressed scenarios. This means funds investing in cETNs need to have a thorough understanding of cETNs, including the risks associated (see final bullet below).

• Consider whether fund prospectuses and consumer-facing materials will need updating

If a fund intends to hold cETNs beyond a genuine de minimis level, the FCA considers this feature of the investment strategy should be disclosed.

• Assess the prudent spread of risk

Fund managers must assess any cETN holding against the broader portfolio, including other higher-risk assets, indirect exposure to cryptoassets through other funds, and assets correlated with cryptoassets.

Next steps

The consultation closes on 13 July 2026. Responses should be sent to mailto:cp26-17@fca.org.uk.

If the FCA proceeds with the proposals, it will publish final rules in a policy statement. The FCA has said that any cost increase will be of minimal significance. The FCA anticipates that fund managers will only incur costs if they decide to assess whether cETNs are appropriate for a particular fund and its investors.

How we can help

Eversheds Sutherland advises fund managers, depositaries and platforms on the regulatory framework for authorised funds. We help clients assess the impact of FCA rule changes on their fund range and product documentation. We can help you respond to this consultation and prepare for the new rules on cETN holdings.