TLDR
- The FCA has proposed new regulations to bring crypto firms under full UK oversight by 2026.
- The proposal includes extending the FCA Handbook to crypto firms, covering governance, resilience, and financial crime prevention.
- The Senior Managers and Certification Regime will hold individuals accountable for their firm’s actions.
- Crypto firms will need to meet strict operational resilience standards to reduce risks like cyberattacks and disruptions.
- The FCA is considering applying its Consumer Duty to crypto firms to ensure better outcomes for retail customers.
The Financial Conduct Authority (FCA) has announced new proposals aiming to bring cryptoasset firms under full UK oversight by 2026. The move seeks to regulate the sector more closely, with a focus on operational resilience, financial crime prevention, and governance. FCA plans to apply existing financial rules to the digital asset sector, adjusting them to meet crypto’s unique challenges.
Application of FCA Handbook to Crypto Firms
The FCA’s proposal includes extending the FCA Handbook to crypto firms. This handbook will cover key areas such as financial crime prevention and senior management accountability. The new rules will also demand strict operational resilience standards from firms, especially around cybersecurity and handling operational disruptions.
Under these proposals, the Senior Managers and Certification Regime will hold individuals accountable for their firm’s actions. This shift aims to reduce the opacity that has plagued the crypto industry. The FCA will impose clear governance structures, requiring firms to take responsibility for their operations, including addressing financial crime risks.
The FCA’s proposals are designed to bring crypto activities in line with traditional financial regulations. The application of these rules is expected to set clear expectations for firms, improving transparency. By requiring firms to meet high standards, the FCA aims to build consumer confidence in the digital asset sector.
Focus on Consumer Protection and Operational Resilience
A key part of the FCA’s proposal is improving consumer protection within the crypto sector. The regulator has introduced a consultation on applying the Consumer Duty to crypto firms. This move will require firms to deliver positive outcomes for retail customers, moving beyond the current “caveat emptor” environment.
The FCA also aims to strengthen crypto firms’ operational resilience. By enforcing stronger cybersecurity and contingency measures, the authority wants to reduce the risk of losses from cyberattacks and other disruptions. This approach follows several high-profile failures in the crypto industry, where operational shocks have led to significant consumer harm.
The FCA’s proposal reflects the need to adapt traditional financial rules to address the unique risks of crypto. Despite inherent volatility, these measures aim to provide a safer and more reliable market for consumers. As David Geale, the FCA’s executive director, stated,
“Our proposals won’t remove the risks of investing in crypto, but they will help firms meet common standards.”
FCA’s Consultation and Future Regulation
The FCA has opened a consultation period to seek industry feedback on its proposed regulations. Firms will have until October and November 2025 to provide input. The final regulatory framework will be implemented by 2026, shaping the future of crypto regulation in the UK.
The FCA is also considering integrating crypto asset disputes into the Financial Ombudsman Service. This move would provide an independent and formal dispute resolution mechanism for consumers, increasing accountability. The consultation period will reveal whether the industry is prepared to operate with the same rigor as traditional finance.
