Article Details

UK FCA May Exempt Crypto Firms from Key TradFi Rules — What’s at Stake?

The UK Financial Conduct Authority (FCA) has launched a consultation on whether crypto firms should be held to the same regulatory standards as traditional financial institutions. The proposals aim to set minimum requirements while considering exemptions for the unique aspects of the crypto sector.

The consultation paper CP25/25, published today, explores how existing FCA Handbook rules could apply to cryptoasset activities. The regulator said its goal is to build a competitive and sustainable market that supports innovation while strengthening consumer trust.

FCA Unveils Major UK Crypto Rules Overhaul for Investors

The FCA consultation seeks to align crypto oversight with standards already in place for banks and other financial institutions. These include governance obligations, systems and controls to combat financial crime, and measures to ensure operational resilience. Environmental, social, and governance (ESG) requirements may also be introduced.

A central point of discussion is whether the FCA’s Consumer Duty should apply to crypto. The principle requires firms to act in ways that deliver good outcomes for customers.

The regulator is also seeking input on how complaints should be handled, including whether customers should be able to refer disputes to the Financial Ombudsman Service.

David Geale, executive director of payments and digital finance, said the aim is to help firms meet common standards without removing the risks inherent in crypto investing.

“Our proposals won’t remove the risks of investing in crypto, but they will help build trust in the sector,” he said.

Currently, FCA oversight of crypto is limited to financial promotions and measures to prevent financial crime. The consultation marks an intent to expand its remit under the government’s broader plan to integrate crypto into the financial services regulatory regime.

In August, Binance UK director Nish Patel said Britain is nearing a comprehensive crypto framework, with stricter rules for retail investors and more flexibility for professionals expected within a year.

Notably, the FCA has now set two deadlines for feedback. Stakeholders have until Oct. 15, 2025, to comment on discussion topics such as consumer duty and complaints handling.

Responses to the wider consultation proposals must be submitted by Nov. 12, 2025. The regulator said it will review all input and publish final rules in 2026.

Furthermore, the FCA announced its plans to hold a series of in-person and virtual events to support industry engagement, and feedback is expected from crypto firms, trade groups, law firms, auditors, and consumer advocacy groups, as well as policymakers and academics.

UK Crypto Regulation: FCA Lifts Ban, Crackdown Looms

The FCA’s proposals come as it seeks to bring crypto markets under tighter supervision. Notably, the Bank of England plans to limit UK banks’ crypto exposure by 2026, following Basel rules that cap holdings at 1% and require standardized disclosures.

Earlier this year in April, the HM Treasury’s draft legislation was published, setting out the legal framework for new regulated cryptoasset activities. Once finalized, firms and individuals conducting such activities in the UK will be required to apply for FCA authorization before operating.

Notably, this development follows the FCA lifting its ban on crypto exchange-traded notes (ETNs) for retail investors starting October 8, ending more than four years of restrictions. This move allows access to ETNs listed on FCA-recognized UK exchanges under strict promotion rules.

Despite this, the UK and US are currently exploring closer collaboration on digital assets, with sources saying Chancellor Rachel Reeves and Treasury Secretary Scott Bessent held talks involving crypto firms as well as major banks.

Similarly, the FCA is advancing plans for a 2026 “gateway regime” that will authorize crypto firms while finalizing rules for stablecoins and custody.

The push comes as European banks cautiously expand into crypto, with BBVA offering services to wealthy clients despite ESMA data showing 95% of EU banks remain uninvolved.

Meanwhile, the European Union has already advanced its Markets in Crypto-Assets (MiCA) regulation, while the United States continues to debate federal oversight. The UK framework could set a benchmark for how jurisdictions balance innovation with consumer protection.

The post UK FCA May Exempt Crypto Firms from Key TradFi Rules — What’s at Stake? appeared first on Cryptonews.