The Financial Conduct Authority (FCA) appears ready to impose a strong set of requirements on the crypto sector. 

In its proposed crypto assets regulatory regime, which it has just put forward for consultation, the FCA says it would apply rules on operational risk to a wider range of crypto assets firms than it does in other regulated sectors, due to the high technological risk specific to the crypto sector. 

But the FCA has made it clear that, in some areas, the new rules for crypto firms would be similar to those that already apply in other sectors.

David Geale, executive director of payments and digital finance at the FCA, said:

“We want to develop a sustainable and competitive crypto sector – balancing innovation, market integrity and trust. Our proposals won’t remove the risks of investing in crypto, but they will help firms meet common standards, so consumers have a better idea of what to expect.”

The FCA’s operational risk framework requires firms to have systems and controls in place to prevent, or deal with, events such as cyberattacks and system outages. The regulator cited technological issues that are only found in the crypto sector, such as the integration of distributed ledger technologies (decentralised systems such as blockchains) into core systems and processes.

The FCA believes that the crypto sector’s dependence on systems and technology means that “poor operational resilience can amplify the impact of operational and technology risks, leading to significant disruptions that can ultimately cause serious consumer harm if managed poorly". 

It has also said that crypto firms are responsible for managing risk in external operations whose services they use. It added that it would consult in the first half of 2026 regarding this.

Regime

The regulator is also set to apply all of its senior managers and certification regime to the crypto sector, as well as its financial crime rules. It is to consider how to categorise crypto firms as enhanced under the senior managers regime. Such categorisation brings with it extra requirements, such as ensuring a senior manager has overall responsibility for every activity. The FCA has suggested it may categorise crypto custodian firms holding between £1 billion and £100 billion in crypto assets for clients as enhanced.

The FCA is also seeking representations about how its Consumer Duty framework could be applied to the crypto sector. The Consumer Duty sets higher and clearer standards of consumer protection across financial services and requires firms to put their customers' needs first. It wants to hear views on how complaints against crypto firms should be managed, including whether it should be possible for consumers to refer such complaints to the Financial Ombudsman Service.

The final deadline for consultation responses is 12 November, with final rules expected to be published next year. The growth in regulation in the sector shows the UK’s commitment to the long-term growth of the asset class and the continued legitimisation of the sector. All of which will assist the UK in positioning itself as a strong jurisdiction for the use of cryptocurrencies.

Syedur Rahman & James Hurren, Rahman Ravelli.