The Financial Conduct Authority (FCA) has unveiled proposals that could reshape the regulatory landscape for crypto firms in the United Kingdom, with a focus on both raising standards and, in some cases, exempting digital asset companies from certain requirements applied to traditional financial services.

The FCA’s consultation, published on 17 September, seeks feedback on how its existing rules—covering areas such as operational resilience, governance, and financial crime prevention—should be extended to cryptoasset businesses. The regulator is also considering whether to apply its consumer duty, which requires firms to deliver good outcomes for customers, to the crypto sector.

This would include the possibility for consumers to refer complaints to the Financial Ombudsman Service, a move that could provide greater recourse for those who suffer losses or poor service. David Geale, executive director of payments and digital finance at the FCA, said, “We want to develop a sustainable and competitive crypto sector — balancing innovation, market integrity and trust. Our proposals won’t remove the risks of investing in crypto, but they will help firms meet common standards so consumers have a better idea of what to expect”.

The consultation paper outlines that cryptoassets have grown in popularity, with ownership among British adults rising from 4 per cent to 12 per cent since 2020. The FCA estimates that applying its rules to crypto firms could reduce consumer harm, projecting benefits of £130 million against anticipated compliance costs of £92.6 million.

However, the regulator is also proposing to exempt crypto firms from four of its core principles, including requirements to act with integrity, exercise skill and care, pay due regard to customer interests, and ensure advice is suitable. The FCA argues that these waivers are intended to allow fast-growing crypto businesses to compete internationally, while still imposing tougher standards in areas such as operational risk and cybersecurity. “Our proposals won’t remove the risks of investing in crypto, but they will help firms meet common standards,” Geale added.

The consultation period runs until November, with final rules expected in 2026. The FCA’s approach follows draft legislation from HM Treasury and reflects the government’s ambition to bring cryptoassets within the regulatory perimeter, while balancing innovation with consumer protection.

---