12 February 2025
The FCA’s Next Steps in Crypto Regulation: A More Structured Approach?
Camila Soria, Legal Advisor
The UK Financial Conduct Authority (FCA) is swiftly advancing its approach to crypto regulation, striving to establish a robust framework that promotes innovation while upholding market integrity and consumer protection. With a significant surge in crypto ownership, now at 12% of UK adults compared to 10% in previous research, the growth of digital assets is undeniable. However, this expansion presents the challenge of ensuring a regulatory environment that safeguards against fraud, enhances transparency, and aligns with global financial standards.
A Holistic Approach to Crypto Regulation
The UK government is making a decisive shift in its approach to crypto regulation, moving away from a phased model and adopting a broad, conduct-based regulatory framework. Previously, the plan was to introduce regulation in stages, with stablecoins as the first focus, followed by incremental oversight of other crypto activities. However, this piecemeal approach has now been abandoned in favor of a holistic regulatory structure that treats the crypto industry as an integrated financial ecosystem.
Under this new approach, the FCA will simultaneously oversee crypto trading platforms, stablecoin issuance, custody services, intermediation, and other key market functions. The decision to regulate these elements concurrently reflects the government’s recognition that crypto markets operate as interconnected systems, where risks and activities cannot be effectively regulated in isolation. By treating digital assets more like traditional financial instruments, regulators aim to enhance market integrity, investor protection, and compliance standards across the board.
Key Regulatory Developments and Initiatives
The FCA’s latest Discussion Paper (DP24/4) presents a comprehensive roadmap outlining the upcoming regulatory initiatives in the cryptocurrency sector. This roadmap outlines a structured timeline for policy discussions, consultations, and the gradual introduction of regulatory requirements over the next two years, culminating in a comprehensive regulatory framework by 2026. The FCA’s broader ambition is to position the UK as a global leader in cryptocurrency. A well-defined and consistent regulatory regime is crucial for UK firms operating in this sector to remain competitive in the global marketplace.
This shift represents a major evolution in the UK’s crypto policy, signaling a move toward a structured and predictable regulatory environment. By implementing a comprehensive framework, the government seeks to balance innovation with robust consumer protections, providing greater certainty for crypto businesses while aligning with global financial regulatory standards.
One of the most anticipated regulatory developments is the Admissions and Disclosures Regime (A&D). This regime will impose stricter requirements on cryptocurrency issuers and trading platforms. Under this framework, any cryptocurrency asset seeking admission to trading on a regulated Cryptoasset Trading Platform (CATP) will be required to meet enhanced transparency and disclosure standards. This ensures that investors receive accurate, reliable, and standardized information about listed tokens, thereby reducing risks associated with misinformation and fraud.
Concurrently, the Market Abuse Regime for Cryptoassets (MARC) will introduce robust protections against insider trading, price manipulation, and fraudulent schemes. Recognizing the vulnerability of cryptocurrency markets due to their decentralized and fragmented nature, the FCA aims to enhance market integrity. MARC will mandate cryptocurrency trading platforms to implement surveillance mechanisms, actively monitor trading activity, and promptly report suspicious behavior to regulators. This approach aligns with existing market abuse frameworks in traditional finance, ensuring that cryptocurrency markets operate under clear and enforceable rules.
Furthermore, the roadmap includes provisions for stablecoins, prudential regulations, and trading standards. These measures aim to address specific challenges and enhance the overall stability and security of the cryptocurrency ecosystem.
Stablecoins are gaining prominence as a key focus of UK regulation. Amidst growing concerns about their stability and backing mechanisms, the FCA is proposing a comprehensive regulatory framework for stablecoin issuance, custody, and redemption processes. The primary objective is to ensure that stablecoins used for payments or DeFi applications meet minimum liquidity and reserve requirements, thereby mitigating risks associated with unregulated digital currencies.
Beyond stablecoins, the FCA is also preparing prudential requirements for cryptocurrency firms, encompassing areas such as capital adequacy, liquidity management, and operational resilience. These regulations will establish clear expectations for how cryptocurrency businesses manage risk, prioritizing financial stability and consumer protection.
The roadmap outlines upcoming trading platform regulations, focusing on matching, execution transparency, and order handling requirements. As decentralized finance (DeFi) platforms continue to gain traction, the FCA will consider how to regulate on-chain trading mechanisms, aligning them with broader financial market standards.
The FCA’s Crackdown on Illegal Crypto Promotions: A New Era of Strict Compliance
In parallel, the FCA is intensifying its enforcement actions against unregistered cryptocurrency promotions, sending a resounding message to the industry that compliance with financial promotion laws is no longer a matter of convenience. The regulatory body has made it abundantly clear that cryptocurrency firms operating without proper authorization will face severe legal and financial repercussions, reflecting a broader effort to bring the digital asset space under the same rigorous standards as traditional finance.
Particularly those that fail to adhere to strict conditions outlined in FSMA Section 21, a key provision in UK financial law governing financial promotions. Any invitation or inducement to invest in crypto must be approved by an FCA-authorized firm, issued by a registered crypto business, or qualify under a legally recognized exemption. Any promotion that doesn’t meet these criteria is considered illegal and could result in criminal penalties, including up to two years in prison, unlimited fines, or both.
The FCA’s warning doesn’t stop at crypto firms. Banks, payment service providers, and financial institutions that facilitate transactions for unregistered crypto businesses may also be held accountable, especially if their services indirectly support illegal promotions. This creates a ripple effect throughout the financial ecosystem, affecting even companies that don’t directly engage in crypto activities.
For crypto businesses, the implications of this crackdown are substantial. Marketing and promotional strategies must now be fully compliant with FCA regulations, ensuring that all communications directed at UK consumers are legally sound. This includes social media campaigns, website advertisements, influencer promotions, and even the use of embedded payment widgets that link to unregistered crypto firms. The FCA has made it clear that compliance isn’t just about registering a firm; it also involves ensuring that all promotional activities align with UK legal standards.
A Balanced Approach: Regulation Meets Innovation
This push for stricter regulatory oversight doesn’t imply a hostile stance towards crypto innovation in the UK. In fact, a recent decision by His Majesty’s Treasury (HMT) in January 2025 showcases the UK’s proactive approach to crafting a balanced regulatory environment that promotes both compliance and innovation. A notable example is the amendment to UK law, which excludes cryptocurrency staking from the definition of a collective investment scheme. This move aims to maintain the UK’s competitiveness in the global digital asset sector.
The industry has widely applauded this decision for providing regulatory clarity, particularly in contrast to the European Union’s approach under MiCA, which mandates specific authorization for staking service providers. By excluding staking from collective investment scheme regulations, the UK positions itself as a more innovation-friendly jurisdiction, offering crypto businesses greater regulatory certainty and flexibility.
As the regulatory landscape evolves, with some areas tightening while others emerge, crypto firms operating in the UK must proactively secure compliance. This can involve seeking FCA authorization, partnering with approved financial entities, or restructuring promotional strategies to avoid legal risks. The penalties for non-compliance are severe, and the FCA’s enforcement efforts are anticipated to intensify in the coming months.
For companies navigating the evolving FCA regulatory landscape, ensuring compliance is no longer just a legal obligation, it’s a strategic necessity. Failing to align with these new frameworks could lead to severe financial penalties, criminal liability, reputational damage, and exclusion from the UK market.
However, for those who take proactive steps toward compliance, the UK presents an unparalleled opportunity. Unlike many other jurisdictions, it is working toward clearer, structured regulations, creating an environment where legal certainty and market stability can drive long-term institutional adoption.
The UK’s crypto regulatory transformation is no longer just about curbing illicit activity, it’s about creating a sustainable, transparent, and innovation-friendly market. While some fear overregulation may stifle progress, others recognize that clear rules are the foundation of institutional trust and industry legitimacy.
Navigating the Future with Digital Lawyers
Over the next two years, the key challenge will be striking the right balance between oversight and innovation. The UK is positioning itself as a global hub for compliant digital asset businesses, ensuring that companies operate with regulatory clarity while allowing the sector to thrive.
At Digital Lawyers, we provide legal guidance for crypto businesses navigating the FCA’s evolving regulatory landscape and legal restrictions imposed on crypto businesses targeting customers from the UK. Whether you are launching a crypto exchange, developing a DeFi platform, or issuing digital assets, our team ensures your operations comply with the latest UK regulations.
📩 Contact us today to secure your compliance and future-proof your business!
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