FCA Consults on the Application of Key Regulatory Requirements to UK Crypto-Asset Firms

The FCA is the first regulator to set out a comprehensive regulatory regime for crypto-asset firms that is intended to be closely aligned to the existing regime for traditional finance ("TradFi") firms. In December, the FCA released detailed proposals regarding the new licensing regime for crypto-asset firms. For more information, see our recent Alert, "United Kingdom Unveils FSMA-Based Regulatory Regime for Cryptoassets." The FCA has now released further detailed proposals setting out which sections of the FCA regime will apply to these firms once they become regulated. The FCA proposes that regulated crypto-asset firms will need to comply with the following:

• The Consumer Duty imposes a requirement on firms to deliver good outcomes for retail customers. This is underpinned by three cross-cutting obligations. Firms must: (i) act in good faith toward retail customers; (ii) avoid causing foreseeable harm to retail customers; and (iii) enable and support retail customers to pursue their financial objectives. Additionally, there are four sets of outcome rules, one of which states that products and services must be designed to meet the needs, characteristics, and objectives of retail customers in an identified target market and distributed appropriately. Compliance with the Consumer Duty will be a very significant lift for UK crypto-asset firms.
• The FCA dispute resolution ("DISP") rules will apply to crypto-asset firms, in a similar way to how it applies to other TradFi firms. The rules in DISP aim to make sure that consumer complaints are resolved quickly and effectively, providing fair and predictable outcomes and obtain redress without going through courts including, for example, financial losses, harm experienced as a result of inappropriate disclosures, or poor customer service.
• Consumers will be able to escalate complaints against UK regulated crypto-asset firms to the Financial Ombudsman ("FOS"). FOS has broad powers to resolve complaints based on what it thinks is fair and reasonable in all circumstances of the case. While FOS takes law into account, it is not a court. Accordingly, FOS has significant latitude to grant award compensation even in situations where courts would not have done so.
• Specific chapters of the FCA conduct of business rules (set out in the "COBS" section of the FCA rules) will apply to regulated crypto-asset firms, with tailored carveouts for transactions concluded on UK qualifying crypto-asset trading platforms and certain interactions with professional clients. COBS rules include fair‑dealing and disclosure standards, client categorization requirements, clients communications and marketing rules, strengthened appropriateness testing for crypto lending/borrowing, and tailored client reporting rules aligned with "CRYPTO" sourcebooks. On marketing, the FCA proposes that UK‑issued qualifying stablecoins would not be classified as "Restricted Mass Market Investments"; however, non‑UK‑issued stablecoins would need to carry additional risk warnings as set out in COBS.

International firms: This latest consultation also includes important information for international firms, and is equally relevant for both consumer facing and institutional only firms. The FCA has stated that it expects firms seeking FCA authorization for crypto-asset activities to have a "presence" in the UK. The FCA has further stated that its baseline expectation is for firms requiring FCA authorization to carry out their regulated crypto-asset activities from a UK legal entity. This is important as it means that client-facing trades and other services will need to be booked with / provided from this UK entity. This will require firms with international operations seeking authorization to operate in the UK to carefully reexamine their booking and target operating models, as well as their global tax analysis.

Proposals have not progressed: The FCA had discussed whether regulated crypto-asset firms should be prohibited from accepting credit cards or certain other credit lines for crypto-asset purchases. This was due to concerns about vulnerable consumers incurring unsustainable debt if asset values fall and a consumer was relying on that value to repay the credit. However, following various submissions, the FCA has decided not to proceed with any ban on the use of credit cards to purchase crypto assets.

The consultation is open until March 12, 2026.