Cryptoasset Firms: What are the FCA’s latest proposals?

What is the FCA’s overall approach?

In April 2025, HM Treasury published a draft Statutory Instrument (SI) and Policy Note outlining provisions that will create new regulated activities in relation to cryptoassets. When the finalised SI comes into force, it will bring certain cryptoasset activities into the FCA’s remit, including issuing qualifying stablecoins, safeguarding qualifying cryptoassets and specified investment cryptoassets, operating a qualifying cryptoasset trading platform (CATP), intermediation and staking (‘Cryptoasset Firms’). 

The proposals make clear that that the relevant FCA rules would apply generally to Cryptoasset Firms, regardless of the specific cryptoasset activities the firm undertakes, aligning Cryptoasset Firms with existing FSMA-authorised firms (i.e. firms authorised under the Financial Services and Markets Act 2000). The FCA has explained that it is taking this approach to ensure that all Cryptoasset Firms have the necessary systems and controls, processes, financial resources and people in place. However, the FCA has also asked for feedback on whether certain of the rules and guidance could be better tailored to Cryptoasset Firm activities and the development of the sector.

What are the specific proposals?

There are three key areas the FCA is consulting on: (1) high-level standards and supervision; (2) senior manager arrangements and systems and control requirements, and related guidance on operational resilience; and (3) business standards.

High-level standards and supervision

Summary: In broad terms, the FCA proposes to apply these standards to Cryptoasset Firms without modification, other than to disapply certain principles in particular cases. The FCA has asked for feedback on this approach and consultees may wish to consider whether certain aspects of these rules and related guidance could be better tailored to Cryptoasset Firms and their activities.

Key requirements: The high-level standards set out in the FCA Handbook are intended to be core principles that define the fundamental obligations that apply to all FCA authorised firms. Broadly, the FCA is proposing to apply these standards to Cryptoasset Firms, similar to how they apply for traditional finance firms.

In relation to the Threshold Conditions Sourcebook (COND) and the General Provisions of the FCA Handbook (GEN), the FCA is consulting on simply applying these sourcebooks and the related threshold conditions guidance to Cryptoasset Firms without modification. The FCA considers this is proportionate as the Threshold Conditions are minimum standards a firm must satisfy to be granted and retain authorisation and that the General Provisions cover certain general administrative duties for firms.

Similarly, the FCA is proposing to apply the sections of the Supervision Manual (SUP) relevant to existing FCA regulated firms (other than SUP 16 as that will be in a future consultation).

In slight contrast, while the FCA is consulting on applying the Principles (PRIN) to Cryptoasset Firms, they are proposing to make some modifications to its application. The FCA propose to make clear that the definitions of customer and client will include a holder of a qualifying stablecoin. The FCA proposes to disapply certain Principles 1 (Integrity), 2 (Skill, care and diligence), 6 (Customers interests) and 9 (Customers: relationships of trust) in relation to transactions entered into on a CATP by its members and to disapply Principles 6 and 9 to firms which provide the service of operating a CATP for professional clients. Further, the FCA is not consulting on applying Principle 12 (the Consumer Duty) to Cryptoasset Firms in this CP as this will be addressed in a later consultation.

As a result, consultees may want to consider whether these proposals are appropriate for this sector or whether the FCA ought to consider applying these standards in a way that might be better tailored to or proportionate for Cryptoasset Firms specifically.

Senior Manager Arrangements and Systems and Controls (SYSC) requirements

Summary: In broad terms, the FCA proposes to apply these requirements to Cryptoasset Firms without modifications, other than to clarify that Cryptoasset Firms (subject to any other activities they might carry out) will not be classed as firms to which some of the most stringent systems and controls requirements will apply, apart from in the area of operational resilience where higher standards will be applicable. Again, the FCA has asked for feedback on this approach and consultees may wish to consider whether certain aspects of these rules and related guidance could be more tailored to Cryptoasset Firms.

Key requirements: The FCA is proposing to apply SYSC and the financial crime guidance and reviews (in FCG, FCTR) to Cryptoasset Firms, in a similar way to how they apply to most FSMA-authorised firms.

However, Cryptoasset Firms will be classified as ‘other firms’ rather than ‘common platform firms’, meaning that the most complex and stringent requirements won’t apply. The FCA has explained that this is in recognition that these firms will be less likely to pose systemic risk. This is unless of course the relevant firm is otherwise a ‘common platform firm’ in which case it will still need to meet the higher standard across all of its activities.

In relation to the Senior Managers and Certification Regime (SMCR), the FCA also proposes to apply existing requirements, again in line with the current approach for other FCA authorised firms. However, the FCA has highlighted that a wider review of this regime is ongoing. 

Again, consultees may want to consider whether this approach is appropriate, and the FCA has in fact highlighted certain areas on which it would appreciate comments, for example in relation to the application of the tiering of firms under the regime, i.e. what activities and other criteria determine whether firms need to comply with the most SMCR requirements. The FCA has also specifically asked for feedback on the certification functions that would be most relevant to Cryptoasset Firms.

In contrast, the FCA is proposing to extend the scope of the operational resilience requirements in SYSC 15A beyond its current application to FSMA-authorised firms (i.e. firms authorised under the Financial Services and Markets Act 2000). The FCA has explained that this is due to specific risks in this sector resulting from firms’ reliance on systems and technology.

In addition, the FCA is consulting on non-handbook guidance to help firms to understand and apply this framework, as the FCA recognises that certain business models may be more exposed to these risks than others. This guidance provides examples that are intended to reflect different business models.

The FCA has asked for feedback on both the extension of these rules to Cryptoasset Firms and on the substance of the accompanying guidance.

Business Standards

Summary: In relation to Business Standards, the scope of the consultation is more limited. However, the FCA is consulting on applying the ESG sourcebook to Cryptoasset Firms, but only to the extent it applies generally to FSMA-authorised firms and does not plan to apply firm specific rules at this stage.

Key requirements: The FCA has made clear that ESG rules that currently only apply to specific firm types such as asset managers, asset owners and distributors will not be extended and also that the FCA doesn’t propose to introduce any new cryptoasset-specific environmental, social and governance standards.

This means that the rules that would apply are those related to ensuring that claims about sustainability characteristics of relevant products are fair, clear and not misleading. The FCA has also made clear that it does not intend for Cryptoasset Firms to be able to use a sustainability label.

What areas are still at the discussion stage?

Summary: In this section of the paper, the FCA sets out areas where it acknowledges that simply applying the current rules to Cryptoasset Firms, without further tailoring, could result in the right outcomes not being achieved, and asks for feedback on how these rules may best be applied to this sector.

Key areas for discussion: The FCA is not yet consulting on applying the consumer duty to Cryptoasset Firms but has set out two options for consideration. In relation to option 1, which would be to apply the duty but with sector-specific guidance, the FCA sets out that this could be important for upholding a baseline of consumer protection and that it considers that the duty allows for more flexibility than prescriptive rules. Counter to this, under option 2, where the FCA would not apply the duty but would create new tailored rules, the FCA has explained this would be to recognise that this market is still developing and that many firms will not have been regulated before and so may find the duty challenging to apply. 

However, the FCA suggests that its current preferred approach would be to apply the duty with additional guidance (other than to trading between participants on a UK authorised CATP) but it does specifically ask consultees to consider areas where this approach might not in fact achieve that outcome.

Further, the FCA is proposing to apply the COBS requirements to these firms, subject to some exceptions and adjustments, in particular where provisions refer to types of firms or services that do not have a similar risk to cryptoasset activities. Finally, there are certain chapters that the FCA currently intends to disapply entirely, for example communication related requirements where the rules don’t reflect current technological developments.

In contrast, in relation to PROD the FCA has stated that it is considering not applying existing provisions It is also not intending to design a new chapter for firms that provide cryptoasset products or services. However, the FCA does ask for specific feedback as to whether a bespoke regime may be needed so there may be further proposals in this area in due course.

Finally, the FCA has explained that it is considering applying the complaints handling rules to Cryptoasset Firms and that its current preferred approach would also be to consult on extending access to the FOS in relation to newly regulated Cryptoasset activities. The FCA has asked for feedback on whether there are any factors that should be considered when determining if this is appropriate or whether there are specific activities for which the FOS should not be able to consider complaints.

What should firms look out for in future consultation papers?

As well as future consultations on the areas for discussion, there are some specific areas the FCA has carved out of this consultation. In particular, the FCA has not set out its approach to applying the reporting requirements in SUP 16 in this paper and plans to consult separately on this. In relation to systems and controls, the FCA is also planning to consult on further changes to the conflicts of interest provisions in SYSC 10 and a separate consultation will also follow on the application of the training and competence requirements. The FCA is also considering whether there ought to be bespoke COBS requirements, in addition to the current proposals to extend the application of the existing rules.

The FCA also explained that it will consult separately on activity specific rules and guidance relating to cryptoasset activities, as well as the application of admissions and disclosure rules under the market abuse regime, so firms can also expect these consultations later this year.

Finally, the FCA reminded firms of its prior consultations on qualifying stablecoin issuance and cryptoasset custody, as well as on the prudential regime for Cryptoasset Firms.