FCA Opens Consultation on Extending Regulatory Standards to UK Crypto Sector

The UK’s Financial Conduct Authority (FCA) has announced a wide-ranging consultation on whether cryptocurrency companies should be subject to the same regulatory obligations as traditional financial institutions. The initiative, set out in consultation paper CP25/25 published today, aims to establish a minimum baseline of requirements while acknowledging that certain exemptions may be needed to reflect the distinctive characteristics of digital assets.

In outlining the proposals, the regulator said it seeks to apply elements of the FCA Handbook to cryptoasset-related activities. Its stated objective is to develop a “competitive and sustainable market that supports innovation while strengthening consumer trust.”

The consultation raises the prospect of aligning oversight of digital asset firms with the standards that banks and other regulated entities already face. These cover areas such as governance, anti-financial crime measures, and operational resilience. The FCA also suggested that environmental, social, and governance (ESG) rules could be introduced for the sector.

One of the central issues up for discussion is whether the Consumer Duty, which obliges firms to ensure they deliver good outcomes for their customers, should be extended to crypto businesses. Another significant point concerns complaints processes, including the possibility of allowing disputes to be escalated to the Financial Ombudsman Service.

David Geale, the FCA’s executive director of payments and digital finance, emphasized the regulator’s intention to raise standards without erasing the risks inherent to crypto investment. “Our proposals won’t remove the risks of investing in crypto, but they will help build trust in the sector,” he said.

At present, FCA jurisdiction over digital assets is limited mainly to financial promotions and anti-financial crime measures. This consultation signals a major expansion of its role as part of the government’s strategy to embed crypto into the UK’s broader financial services regulatory framework.

In August, Nish Patel, director of Binance UK, noted that Britain is on the cusp of a full-fledged crypto regime. He predicted tougher rules for retail investors coupled with more flexibility for professional participants would be in place within a year.

To facilitate broad engagement, the FCA has established two consultation deadlines. Feedback on discussion areas such as consumer duty and dispute resolution must be submitted by October 15, 2025, while responses to the broader set of proposals are due by November 12, 2025. The regulator confirmed it will analyze all contributions and issue its final rulebook in 2026.

As part of the process, the FCA said it will organize both in-person and online events to encourage participation. Input is expected from crypto businesses, trade associations, law firms, auditors, consumer groups, policymakers, and academics.

The announcement arrives at a time when the FCA is pressing to bring digital markets under firmer supervision. Parallel efforts are underway at the Bank of England, which intends to cap UK banks’ exposure to crypto at 1% of holdings by 2026, in line with Basel requirements, alongside mandatory disclosure obligations.

The consultation also follows HM Treasury’s publication of draft legislation in April that will provide the legal structure for regulating cryptoasset activities. Once those measures take effect, any individual or firm offering such services in the UK will need to secure authorization from the FCA before operating.

In a further shift, the FCA has moved to end its more than four-year prohibition on crypto exchange-traded notes (ETNs) for retail investors. Starting October 8, ETNs listed on FCA-recognized UK exchanges will again become available to the public, albeit under stringent promotion requirements.

The UK government is also exploring closer international cooperation on digital asset regulation. Sources have indicated that Chancellor Rachel Reeves and US Treasury Secretary Scott Bessent have held discussions with crypto businesses and major banks regarding potential joint approaches.

Looking ahead, the FCA is working toward a 2026 “gateway regime” to oversee the authorization of crypto firms, while at the same time finalizing new rules for stablecoins and custody arrangements.

These moves come as European banks cautiously test crypto services—BBVA, for instance, now provides them to high-net-worth clients—even as data from the European Securities and Markets Authority (ESMA) shows that 95% of EU banks remain outside the sector.

The UK’s regulatory trajectory is unfolding in parallel with global developments. The European Union has already enacted its Markets in Crypto-Assets (MiCA) regulation, while debates over federal oversight continue in the United States. The FCA’s proposed framework could ultimately set a model for how jurisdictions attempt to balance the twin priorities of innovation and consumer protection.

By fLEXI tEAM