UK financial regulator moves to allow mutual funds 10% exposure to crypto ETNs

The UK's Financial Conduct Authority (FCA) proposed new rules on March 11, 2024, that would permit certain investment funds, specifically authorized fund managers, to offer investors up to 10% exposure to crypto exchange-traded notes (ETNs). This move aims to provide retail investors with regulated access to digital assets through familiar investment structures. The proposed guidance clarifies that these crypto ETNs must be listed on regulated exchanges and meet specific criteria, such as being UCITS eligible. The FCA stated that this change would not apply to direct holdings of cryptocurrencies but rather to ETNs that derive their value from underlying crypto assets. This regulatory development follows extensive consultation and aims to balance investor protection with the growing demand for digital asset investments. The FCA emphasized that this proposal is part of a broader effort to ensure the UK remains a competitive and innovative financial center while maintaining robust regulatory oversight. The consultation period for these proposed changes will run until March 20, 2024, after which the FCA will review feedback before finalizing the rules.