The UK Financial Conduct Authority is weighing a rule that would let UCITS schemes and most non-UCITS retail schemes hold crypto exchange-traded notes, capped at 10% of scheme property.

The proposal, set out in the FCA’s CP26/17 consultation, would move crypto exposure deeper into regulated fund plumbing. Retail investors already gained a route to crypto ETNs as standalone exchange products.

The new question is how far those notes can travel inside diversified portfolios run by authorized fund managers.

The answer is a short leash. The FCA would allow a limited ETN sleeve where it matches the fund’s disclosed objective and risk profile.

Direct holdings of Bitcoin, Ether, or other cryptoassets for investment purposes remain outside the…