The Financial Conduct Authority (FCA) of the United Kingdom has signaled that comprehensive crypto asset regulation could be established by 2026. As part of these efforts, the FCA has recently released a discussion paper focusing on the key issues of admissions, disclosures, and the regulation of market abuse within the crypto space.
The UK government is considering a significant expansion of the FCA’s regulatory powers. Currently limited to anti-money laundering and promotional activities, the proposed changes would extend its oversight to encompass crypto asset trading, stablecoin regulations, and related services like intermediation and custody.
Security tokens, tokenized financial instruments, and certain investment vehicles already fall under the purview of the Financial Services and Markets Act 2000 through the Regulated Activities Order (RAO) 2001. The discussion paper outlines that public offerings of crypto assets will generally be prohibited unless specific exemptions apply. Such exemptions may include admissions to trading on approved crypto asset trading platforms (CATPs) or offerings exclusively to qualified investors, like institutional entities.
Admissions and Public Disclosures
Once an exemption is granted, the involved crypto asset must undergo rigorous due diligence and disclosures before being admitted to a CATP. The FCA emphasizes that public disclosures must meet stringent standards to ensure market integrity, and it reserves the right to mandate compensation for breaches in financial promotions.
While the UK has an established civil market abuse regime for traditional finance, this framework cannot be directly applied to crypto assets due to their distinct nature. The FCA’s approach is informed by the International Organization of Securities Commissions (IOSCO) recommendations on crypto and digital assets, aiming to adapt and integrate these guidelines effectively.
A notable aspect of the proposed regulations is the facilitation of cross-platform information sharing to combat market abuse. For instance, if a user is offboarded from one CATP due to suspected market abuse, this information could potentially be shared with another CATP where the user holds an account. This measure is designed to aid CATPs in making informed decisions about user activities and integrity.
Timeline and Consultation
The roadmap for implementing these regulations was initially outlined by HM Treasury in February 2023, with a confirmation from the new government in November 2024 to continue with these plans, albeit without the originally proposed phased approach. The FCA is separately consulting on stablecoin regulation and has opened its discussion paper to feedback from both domestic and international stakeholders in the wholesale sector until March 14, 2025.
| Date | Event |
|---|---|
| Feb 2023 | HM Treasury releases initial plans for crypto regulation |
| Nov 2024 | Government confirms continuation of regulatory plans |
| Mar 2025 | Deadline for feedback on the FCA discussion paper |
| Dec 2026 | Expected year for full crypto asset regulation |
Author’s opinion
The FCA’s proactive steps towards establishing a robust regulatory framework for crypto assets mark a pivotal development in the governance of digital currencies within the UK. These regulations aim not only to protect investors but also to maintain the integrity of the financial system amid the rising popularity and adoption of crypto assets. By setting stringent standards and facilitating better information sharing among platforms, the FCA is positioning the UK as a leader in crypto asset regulation, fostering a safer and more transparent environment for all market participants.
