The United Kingdom’s Financial Conduct Authority has proposed easing key regulatory requirements for crypto firms, outlining exemptions from four of its core conduct rules that apply to traditional financial institutions. The move forms part of the country’s broader legislative effort to bring cryptoasset activities under formal regulatory oversight. In a consultation paper published on Wednesday, the FCA proposed that crypto firms could be excluded from rules requiring them to conduct business with integrity, act with due skill, care and diligence, treat customers fairly, and ensure suitable advice is provided when offering discretionary investment services.
These principles, which are fundamental to the FCA’s regulatory framework for financial firms, would not apply under the proposed regime for cryptoasset businesses. The proposed framework would still impose various obligations, including those concerning financial promotions, anti-money laundering, and customer due diligence. Crypto firms operating in the UK are already required to comply with some of these requirements following previous regulatory updates.
According to the FCA, the approach aims to apply proportionate regulation tailored to the specific risks of crypto markets. The regulator said the principles being exempted were not considered necessary at this stage for cryptoasset firms, although other protections would remain in place. The consultation forms part of the UK’s implementation of the Financial Services and Markets Act 2023, which extends the FCA’s remit to cover a broader range of digital assets.
Crypto firms may bypass key FCA business conduct rules
The FCA is also consulting on additional matters related to the regulation of crypto services, including whether these firms should fall under the scope of the Consumer Duty rules. These rules require firms to deliver good outcomes for customers and are currently applied to retail financial services. The consultation also asks whether users of cryptoasset services should have recourse to the Financial Ombudsman Service, which handles consumer complaints against regulated financial companies.
The regulator said it intends to apply stricter requirements in other areas, particularly around operational resilience. It referenced high-profile security breaches in the sector, highlighting the importance of robust systems and controls to mitigate risks such as cyberattacks and technical failures. The proposed rules would apply to firms involved in cryptoasset trading, exchange services, custody, and other key activities. The FCA’s paper includes draft guidance on the application of the Financial Services and Markets Act framework to these firms and outlines expectations for governance, risk management and consumer protection.
Final implementation expected in 2026 after review
The UK Treasury granted the FCA powers to regulate cryptoassets in secondary legislation passed earlier this year. The regulator’s current consultation is part of a phased rollout of the new framework. Cryptoasset service providers that wish to operate legally in the UK market will need to seek FCA authorization once the new regime takes effect. Public consultation on the proposals will remain open until November 12. The FCA will review feedback before finalizing its policy, with implementation timelines expected to be announced in 2026.
Firms are being encouraged to begin assessing how the proposed rules may impact their operations in preparation for future compliance requirements. According to FCA survey data, approximately 12 percent of UK adults reported holding cryptoassets in 2025, compared to just 4 percent in 2021. The figures underscore the growing retail participation in digital asset markets, which has driven increased scrutiny and regulatory engagement across jurisdictions. – By CryptoWire News Desk.