FCA Seeks Input on New Cryptoasset Firm Regulations

The UK Financial Conduct Authority (FCA) is inviting feedback on proposed rules for cryptoasset firms, marking a significant step in its ongoing regulatory consultations. The initiative is part of a broader effort to establish a comprehensive framework for the crypto sector, which is set to fully launch in September 2026.

The FCA has outlined its plans on how key regulatory principles, such as the Consumer Duty and conduct standards, will be applied to cryptoasset businesses. This includes provisions for customer redress and safeguarding measures. The proposals also address the integration of international cryptoasset firms within the UK regulatory landscape.

The aim is to foster a transparent, sustainable, and competitive market that instills confidence among consumers. The Consumer Duty is designed to ensure that crypto firms achieve favorable outcomes for customers, helping them navigate their financial affairs effectively. The FCA emphasizes that while innovation is encouraged, consumers must be aware of the inherent risks involved—acknowledging that regulation cannot eliminate all risks.

This consultation follows a series of proposals released in December, which laid the groundwork for treating cryptoassets similarly to traditional financial products. These proposals included clear consumer guidelines, proportionate requirements for crypto firms, and flexible support to encourage innovation. Despite progress, it’s important to note that cryptoassets remain largely unregulated at this stage, aside from financial promotions and anti-financial crime measures.

The FCA is seeking input on several key areas:

1. Consumer Duty: Guidance on how the Duty applies to cryptoasset firms to ensure they deliver positive outcomes for retail customers.

2. Redress and Dispute Resolution (DISP): Framework for handling complaints and ensuring consumers have accessible avenues for issue resolution.

3. Conduct of Business Standards (COBS): Key conduct rules to ensure fairness and transparency in cryptoasset activities.

4. Credit for Crypto Purchases: Regulations on using credit for buying cryptoassets to mitigate risks associated with borrowing for investment purposes.

5. Training and Competence: Standards for staff training to ensure that personnel managing crypto services are sufficiently knowledgeable and skilled.

6. Senior Managers and Certification Regime (SM&CR): Classification of cryptoasset firms under the Senior Managers and Certification Regime.

7. Regulatory Reporting (SUP 16): Data reporting requirements for firms to enable effective risk monitoring and supervision by the FCA.

8. Cryptoasset Safeguarding: Safeguarding rules for firms conducting multiple regulated cryptoasset activities, with a focus on the custody of investment cryptoassets.

9. Retail Collateral Treatment in Cryptoasset Borrowing: Guidelines on the treatment of collateral for retail consumers borrowing cryptoassets, aiming to protect their interests.

10. Location Policy Guidance: Clarification on the expected geographical base for cryptoasset firms to ensure effective regulatory oversight.

The FCA is committed to shaping a cryptoasset regime that balances innovation with consumer protection, recognizing that the sector’s fast-paced evolution requires adaptable yet robust regulatory measures. The outcome of this consultation will inform the final regulations, which are crucial as the UK positions itself as a leader in the emerging crypto market. Feedback from stakeholders is expected to refine the approach and address any potential gaps in the proposed regulatory framework.

As the industry awaits the September 2026 launch of the regulatory gateway, the FCA remains focused on ensuring that cryptoasset activities are conducted within a secure and transparent environment. Firms and consumers alike are encouraged to participate in this consultation process, which plays a pivotal role in determining the future landscape of crypto regulation in the UK.

The FCA’s proposal to apply the Consumer Duty to cryptoasset firms is a significant move aimed at ensuring these companies maintain high standards of customer care. According to Sarah Pritchard, the FCA’s Executive Director of Markets, the initiative seeks to extend the same level of consumer protection found in traditional finance to the burgeoning crypto sector. “Our goal is to create a market where consumers are well-informed and protected, while also allowing for innovation,” Pritchard stated. This approach underscores the regulator’s commitment to fostering a balanced environment that supports both growth and consumer safety.

In addition to consumer protection measures, the FCA has proposed specific conduct rules for cryptoasset activities under the Conduct of Business Standards (COBS). These rules are intended to promote fairness and transparency within the industry. The FCA is particularly focused on ensuring that crypto firms act with integrity and provide clear information to consumers. This initiative aligns with the broader regulatory trend of increasing transparency and accountability within financial markets.

The consultation also addresses the use of credit for purchasing cryptoassets. The FCA is proposing rules to mitigate the risks associated with borrowing to invest in volatile digital currencies. By setting clear guidelines, the regulator aims to protect consumers from potential financial harm while encouraging responsible investment practices. This aspect of the proposal reflects the FCA’s broader objective to ensure that financial products, including those in the crypto space, are used responsibly and do not expose consumers to undue risk.

As the cryptoasset market continues to evolve, the FCA’s regulatory framework is also adapting to meet new challenges. The inclusion of international cryptoasset firms in the consultation highlights the global nature of the crypto industry and the need for consistent international standards. By seeking feedback from a wide range of stakeholders, the FCA aims to create a regulatory environment that not only protects UK consumers but also sets a benchmark for global crypto regulation.

The FCA’s focus on training and competence standards for staff in crypto firms is an essential component of the proposed regulatory framework. The emphasis is on ensuring that employees possess adequate knowledge and skills to manage crypto services effectively. This element of the consultation seeks to address the rapid pace of innovation within the crypto sector, which demands a workforce that can keep up with technological advancements and regulatory requirements. By setting these standards, the FCA aims to prevent potential mismanagement and enhance the overall quality of service within the industry.

Furthermore, the Senior Managers and Certification Regime (SM&CR) will be adapted to categorize cryptoasset firms, ensuring accountability and proper governance. The regime, already applied in traditional finance, assigns specific responsibilities to senior managers, making them accountable for their actions. This approach is intended to instill a culture of responsibility within crypto firms, as noted by Mark Steward, the FCA’s Executive Director of Enforcement and Market Oversight. Steward emphasized that this measure is crucial for maintaining trust and integrity in financial markets.

The FCA’s proposed regulatory reporting requirements, detailed under SUP 16, signify a strategic move to enhance oversight of cryptoasset firms. By mandating regular data submissions, the FCA aims to monitor risks more effectively and ensure compliance with established standards. This step is part of a broader strategy to gather comprehensive data on the crypto market, enabling the regulator to respond swiftly to emerging threats and ensure that firms adhere to the rules.

Cryptoasset safeguarding is another key area of focus, as highlighted in the FCA’s proposals. This involves applying safeguarding rules to firms engaged in multiple regulated activities and developing a clear approach to the custody of specified investment cryptoassets. By doing so, the FCA seeks to protect consumer assets and prevent potential losses resulting from firm insolvency or mismanagement. This initiative underscores the regulator’s commitment to creating a secure environment for crypto investments, a priority as the sector continues to attract significant interest and capital.