- UK FCA proposes allowing retail UCITS/non-UCITS funds to invest up to 10% in crypto exchange-traded notes
- The 10% cap is a conservative safeguard to let managers offer measured crypto exposure while keeping investor protections
- Consultation runs five weeks and closes July 13; funds must match crypto exposure to stated objectives and risk profiles
The Financial Conduct Authority (FCA) will make a huge change in financial policy in Britain.
The watchdog proposed allowing retail investment funds to invest up to 10% of their assets in crypto exchange-traded notes (ETNs).
A Safeguarded Approach to Crypto Investment
The FCA stated in its consultation that the proposed 10% cap would “set conservative restrictions on the assets to which a fund can be exposed, in exchange for allowing these funds to be marketed to retail consumers.”
Retail funds seeking to invest in cryptocurrency must also demonstrate that their investment is “consistent with the disclosed investment objectives and risk profile of a given fund,” according to the FCA.
The plan said that unregulated and qualified investor schemes might invest in “more speculative assets,” with no restriction on ownership, but those funds could not be marketed or offered to retail investors.
The strategy specifically covers authorized retail UCITS and non-UCITS investment fund structures.
Moreover, such a limit on investment prevents excessive volatility of any portfolio held by ordinary investors.
The framework helps fund managers manage digital assets with utmost professionalism.
Hence, the major players in the institutions should strike a balance between growth of assets and overall systemic security.
New Consultation for the Cryptocurrency Market
The regulator launched a swift five-week consultation period for feedback on the proposal.
This special review period is ongoing and will officially end on July 13.
Any person in the market wishing to contribute policy suggestions needs to do it before the final deadline.
Additionally, the rules mandate strict alignment between asset selection and the fund’s stated objectives.
Management firms must match their cryptocurrency exposure directly to consumer risk profiles.
This means that money may not take on unhedged risks without the consumer’s explicit permission.
To ensure proper transparency, asset managers must publicly disclose all significant digital token holdings.
This reporting obligation keeps retail clients fully informed about underlying portfolio hazards.
Investors will thus be able to easily keep track of their exposure to these volatile digital assets.
Investment Association Backs FCA
The plan was supported by the Investment Association, a UK asset management trade association.
John Allan, Director of the Innovation and Operations Unit, stated that purchasing cryptocurrency through listed, regulated products provides investors with a more transparent channel than unregulated alternatives, and that the 10% barrier helps to manage risks correctly.
The FCA stated that the funds will be able to own crypto ETNs listed on UK-recognized investment exchanges, as well as those traded on EU and global markets that meet the existing eligible markets requirements.
Fund managers would be expected to demonstrate that any crypto ETN holdings are consistent with a fund’s disclosed investment objectives and risk profile, as well as to report exposure over a true de minimis threshold as a substantial part of the fund strategy.
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