UK’s FCA Unleashes CP26/4: The Crypto Crackdown That Could Reshape Digital Finance
London's financial watchdog just dropped a regulatory bombshell. The Financial Conduct Authority's CP26/4 proposal isn't a gentle nudge—it's a full-scale framework rewrite aimed squarely at the digital asset sector.
The New Rulebook
Forget the light-touch approach. The FCA's latest move slaps stringent operational mandates on crypto firms. Think enhanced due diligence, real-time transaction monitoring, and capital requirements that would make a traditional banker blush. The message is clear: play by our rules, or don't play at all.
Market Shockwaves
Expect immediate turbulence. Exchanges and wallet providers scrambling to comply. A potential exodus of smaller players who can't shoulder the compliance burden. And a chilling effect on innovation—because nothing sparks creativity like a 300-page rulebook.
The Compliance Calculus
This isn't just red tape. It's a deliberate recalibration of risk versus reward. The FCA is betting that short-term pain—slower growth, higher barriers to entry—will buy long-term stability. Whether that trade-off stifles the very dynamism that made crypto attractive remains the billion-pound question.
One cynical take? The old guard always builds higher walls once they figure out how to charge tolls at the gate. The FCA might just be constructing the most sophisticated tollbooth in financial history.
Complaints, ombudsman oversight, and limits on compensation
CP26/4 confirms that crypto firms would be subject to the standard complaint-handling rules of the FCA. Formal procedures and strict response timelines would be in place, bringing crypto firms into line with established financial services practices.
The proposals would also include crypto activities under the Financial Ombudsman Service. The ombudsman would be able to issue binding awards of up to GBP350,000, providing the consumer with redress that many crypto firms have not yet offered. At the same time, the regulator does not intend to extend the Financial Services Compensation Scheme to crypto activities. Customers would not be compensated for investment losses if a crypto firm fails.
Safeguarding, reporting, and a higher bar for global firms
The consultation also alters the way client cryptoassets must be protected. Firms that deal, operate trading platforms, issue stablecoins, or provide custody could be subject to the FCA’s client asset rules. Client money would be segregated and protected under a statutory trust, similar to traditional finance requirements.
Notably, the FCA has proposed to apply its new regime of safeguarding to both qualifying cryptoassets and security tokens. Training and competence standards would also apply to retail clients for staff, although no mandatory qualifications are envisaged.
For governance, CP26/4 includes thresholds for increased supervision under the Senior Manager and Certification Regime. Large stablecoin issuers and custodians holding assets above certain levels would have increased compliance requirements.
International firms are subject to clearer location expectations. The FCA proposes that most firms serving UK clients operate through a UK legal entity. Limited flexibility may be required for trading platforms that need access to global liquidity, but the overall approach is tighter than for non-crypto firms. The consultation also points out that the Prudential Regulation Authority can take similar expectations of systemic stablecoin issuers.
In addition, the FCA has also opened a consultation on CP26/4 until 12 March 2026. Final rules are anticipated later in 2026, with an authorization gateway in September 2026 and the regime coming into force in October 2027.
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