UK Crypto Regulation Enters Final Phase: FCA Nears Landmark Framework Decision
London's financial watchdog is about to lay down the law for crypto. The Financial Conduct Authority (FCA) is barreling into the final stretch of its long-awaited consultation on digital asset regulation—a move that could finally bring clarity to a Wild West market.
The Rulebook Takes Shape
After years of deliberation and market turmoil, the FCA is putting the finishing touches on its regulatory blueprint. This isn't just another discussion paper; it's the culmination of a process that will define how crypto businesses operate on British soil. Expect rules covering everything from exchange listings to consumer warnings.
What's at Stake for the Industry?
For crypto firms, this final phase is make-or-break. Compliance costs will skyrocket, but so will legitimacy. The FCA's stamp of approval could unlock institutional capital currently sitting on the sidelines, wary of regulatory gray areas. It's the classic finance trade-off: freedom for stability, speculation for supervision.
A Global Domino Effect
Watch how London moves—other jurisdictions often follow. The UK's framework could become a template, especially for markets trying to attract crypto talent while keeping scams at bay. The FCA isn't just writing rules; it's positioning the City of London in the global digital asset race.
The Final Countdown
With the consultation window closing, the industry holds its breath. Will the regulations foster innovation or stifle it? One thing's certain: the era of 'move fast and break things' in UK crypto is over. Now comes the hard part—building something that lasts, under the watchful eye of regulators who finally seem to understand what they're looking at. After all, nothing makes a bureaucrat move faster than the smell of taxable revenue.
Final consultation follows the package of proposals last December
According to the FCA, these final consultations follow a package of proposals set out last December on applying the same approach to traditional finance in crypto. The regulator seeks to provide clear information for consumers, with well-balanced requirements for companies and flexibility to support innovation.
The UK regulator is consulting on how the consumer duty will be supported by additional non-Handbook guidance to ensure companies deliver sufficient outcomes for retail customers. It will also seek feedback on its approach to handling conflicts and redress in order to ensure consumers have a clear path to resolving issues.
Moreover, the FCA is looking at how to apply key conduct rules to crypto activities so that companies act transparently and fairly. Rules on buying crypto on credit and reducing the risks of harm from borrowing to invest will also be considered.
The regulator is also following feedback on its approach to categorizing crypto firms under the Certification Regime and the Senior Managers Regime. Standards for staff skills and knowledge need to be set so that firms have competent employees managing crypto services.
The FCA also wants crypto firms to report data to the regulator so that it can monitor risks and supervise operations effectively. It reminds investors that crypto is largely unregulated in the UK and is currently used for financial promotions and financial crimes.
FCA awards Ripple MLR registration
The FCA recently awarded MLR registration to XRP issuer Ripple, following its start of accepting applications last September. According to a notice published on its official website on January 22, the road to formal crypto regulation in the UK became clearer at the end of last year, with legislation from the Treasury extending existing financial rules to include crypto firms.
Meanwhile, the FCA said earlier this month that crypto firms looking to offer services in the UK WOULD be required to be authorized under the new rules taking effect in October 2027. The requirement also applies to crypto firms already registered under its MLRs.
Crypto firms must also comply with operational resilience, consumer duty, financial crime, and governance requirements. The firms already registered under anti-money laundering or payment regulations will need full authorization, while those authorized by the FSMA must vary their permissions.
However, the FCA does not plan to extend Financial Service Compensation Scheme (FSCS) protection to cryptoassets. The FSCS provides compensation for customers when companies cannot meet their liabilities. That will not be the same with investors in crypto firms that go out of business. These customers will not be able to claim compensation for investment losses, even those arising from regulated crypto activities.
There are also potential inconsistencies in this approach, according to the FCA. Claims about shares held in custody will be covered by the FSCS, but claims about safeguarding tokens representing shares on blockchains will not be covered.
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