UK retail funds are about to buy Bitcoin: FCA proposes a 10% allocation cap, public consultation before the end of July

The UK's Financial Conduct Authority (FCA) has proposed a new scheme allowing authorized investment funds to allocate no more than 10% of their assets to crypto exchange-traded notes, enabling retail investors to indirectly hold cryptocurrencies such as Bitcoin and Ethereum.
(Background: The UK presses the "2027" timer, with traditional financial regulations expanding to include cryptocurrencies)
(Additional context: The UK House of Lords rarely criticizes the central bank: strict regulation could make stablecoins "unviable" for business)

Table of Contents

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• 10% Allocation Cap: Conservative but Meaningful
• From Retail Investors to Funds: Bridging the Final Gap
• The Accelerating Crypto Regulation in the UK
• Compared to Taiwan: What Are Our Retirement Funds Allocating To?

The FCA released its 52nd quarterly consultation document on Friday, proposing a new scheme: authorized investment funds can hold up to 10% of their assets in crypto exchange-traded notes, allowing retail investors to indirectly allocate to crypto assets through funds.

10% Allocation Cap: Conservative but Meaningful

This proposal covers UCITS (Undertakings for Collective Investment in Transferable Securities) funds and some non-UCITS funds. The FCA explicitly states in the consultation document that the 10% cap is designed to ensure a "conservative asset limit," while also enabling funds to market to retail investors.

The FCA emphasizes that retail funds must demonstrate that their crypto allocations are "consistent with the declared investment objectives and risk profile" to qualify.

FCA officials state that authorized funds should "remain aligned with investor needs" while ensuring consumers are adequately protected and markets operate smoothly.

From Retail Investors to Funds: Bridging the Final Gap

In August this year, the FCA lifted restrictions on retail trading of crypto exchange-traded notes. This proposal extends the rules to the fund level, closing the gap where retail investors can buy directly, but funds are still restricted from holding crypto assets.

Unregulated and qualified investor funds are not subject to the 10% cap and can invest in "more speculative assets," but their marketing materials are limited to institutions and qualified investors.

The UK's Accelerating Crypto Regulation

This is not the first regulatory move in the UK this year. Timeline overview:

• April: FCA introduces new rules for tokenized funds, making it easier for asset management firms to utilize blockchain technology.
• May: Bank of England adjusts stablecoin regulations, allowing crypto firms to hold certain limits and reserve requirements.
• June: FCA solicits feedback on stablecoin issuance, crypto trading, custody, and staking guidelines.

Last week, the UK House of Lords notably criticized the Bank of England, warning that strict stablecoin rules could make UK stablecoins "unviable" for business.

Compared to Taiwan: What Are Our Retirement Funds Allocating To?

Taiwan’s retirement funds (Labor Retirement Fund) currently mainly allocate to domestic and international stocks, bonds, and fixed deposits. According to the Labor Pension Fund’s 2025 announcement, overseas stocks account for about 25%, domestic stocks 30%, bonds 30%, and fixed deposits 15%. Cryptocurrencies are not yet officially included in the investment options.

If the UK’s scheme is implemented, it will become the first G7 country to explicitly set a quota limit allowing retirement funds and retail investors to hold crypto assets via authorized funds. In contrast, Taiwan’s Labor Retirement Fund’s crypto exposure remains at the stage of "private spontaneous holdings of Bitcoin without limits," and formal inclusion in portfolios may still take another 1-2 years.

The consultation period lasts five weeks, ending on July 13.