The UK’s Financial Conduct Authority is proposing new, more flexible rules for cryptocurrency firms to foster innovation while ensuring consumer protection.
Key Takeaways
- The FCA is waiving some traditional finance rules for crypto companies to create a more suitable regulatory framework.
- The goal is to balance market innovation, consumer protection, and financial integrity, with tailored standards for the crypto sector.
- New proposals focus on crypto-specific risks like cyberattacks while easing requirements that don’t fit decentralized technologies.
- Consultations are ongoing, including whether crypto users can access the UK’s Financial Ombudsman Service for complaints.
What Happened?
The UK’s Financial Conduct Authority (FCA) has published a consultation paper outlining proposals to regulate cryptoasset service providers under a flexible regime. These proposals aim to adjust traditional financial rules to better align with the unique nature of digital assets, including decentralized technologies like blockchain.
Our proposals won’t remove the risks of investing in crypto, but will help firms meet common standards so consumers know what to expect.
— Financial Conduct Authority (@TheFCA) September 17, 2025
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FCA Adapts Traditional Rules for Crypto Firms
In a move signaling the UK’s intent to become a crypto-friendly jurisdiction, the FCA has acknowledged that a rigid application of traditional finance rules will not work for digital assets. David Geale, the FCA’s executive director for payments and digital finance, emphasized that while similar risks should result in similar regulatory outcomes, “some of these things are very different.”
Instead of a simple copy-paste approach from traditional finance, the new proposals adjust standards to reflect the nature of the crypto market:
- Crypto companies will not be subject to the same strict requirements as banks and investment firms, particularly in areas like senior management responsibilities and operational systems.
- The volatile nature of crypto means firms will not need to offer customers a cooling-off period.
- Use of blockchain technology will not be classified as outsourcing, so it won’t trigger additional oversight requirements typically tied to external services.
Consumer Protection and Market Integrity Remain Priorities
Despite relaxing some rules, the FCA is also introducing new standards to address crypto-specific risks:
- Stronger emphasis on cyberattack resilience, due to the sector’s vulnerability to hacks and scams.
- Ongoing discussions are evaluating whether crypto firms should fall under the UK’s Consumer Duty standards, which require financial firms to deliver good outcomes for consumers.
- The regulator is also asking for feedback on how to manage crypto-related complaints, including whether consumers should be allowed to refer disputes to the Financial Ombudsman Service.
Geale reassured that the FCA does not intend to lower overall regulatory standards. He highlighted the importance of ensuring users are fully aware of the risks involved in crypto investing. “We need to always be very clear that this is high risk,” he said.
UK Aims to Lead with Balanced Crypto Regulation
The consultation follows draft legislation from His Majesty’s Treasury introduced in April, which outlined how crypto exchanges, dealers, and agents would be brought into the fold of financial regulation. The UK government described the initiative as a message that the country is “open for business” but closed to fraud and abuse.
In parallel, the UK is working to strengthen international coordination, particularly with the United States. According to the Financial Times, UK Chancellor Rachel Reeves and US Treasury Secretary Scott Bessent recently discussed deepening crypto cooperation. The meeting reportedly involved leaders from companies such as Coinbase, Circle, and Ripple, along with executives from traditional financial institutions like Bank of America, Barclays, and Citi.
CoinLaw’s Takeaway
In my experience covering crypto regulation, this is one of the most balanced moves we’ve seen from a major financial regulator. Instead of trying to force crypto into a traditional mold, the FCA is finally acknowledging that this sector requires a unique approach. I found their willingness to waive outdated rules while still addressing real risks like cyberattacks and transparency particularly smart. This is how you encourage innovation without letting the wild west run unchecked. It also sends a strong message: the UK is ready to lead on crypto, but not without rules that make sense.
