FCA Unveils First Comprehensive Framework for UK Crypto Markets

The UK’s Financial Conduct Authority (FCA) has released a comprehensive set of proposals to regulate large parts of the cryptocurrency market for the first time, including rules governing digital asset listings, insider trading restrictions, and capital requirements for crypto firms.

The proposals were published one day after the UK government introduced draft legislation for cryptoasset companies, underscoring a coordinated push to establish a formal regulatory framework for the sector. The FCA said the measures aim to strike a balance between positioning the UK as a global digital asset hub and protecting consumers in what it described as a high-risk market.

Calibrated Approach to Crypto Oversight

In a shift from earlier proposals, the FCA said it has softened some of its planned restrictions. Notably, crypto trading platforms will not be banned from issuing their own tokens on the markets they operate, nor will they be prohibited from acting as principal dealers — a move welcomed by parts of the industry.

The regulator outlined its plans across three consultation papers published on Tuesday, adapting existing rules used in traditional financial markets to reflect the distinct risks of cryptoassets such as Bitcoin, including volatility, market manipulation, and operational fragility.

The consultation period will remain open until February 12, with final rules expected to be published next year and come into force in 2027.

“Regulation is coming — and we want to get it right,” said David Geale, executive director for payments and digital finance at the FCA. “Our goal is to have a regime that protects consumers, supports innovation, and promotes trust.”

Capital, Market Conduct, and Consumer Risk

Under the proposals, cryptoasset firms would be required to meet existing capital standards applicable to MiFID investment firms, alongside additional requirements tailored to digital assets. Companies would also need to maintain sufficient liquid assets to allow for an orderly wind-down without causing market disruption.

The FCA reiterated that regulation cannot eliminate all risks in crypto markets and warned investors that they could lose their entire investment due to price volatility.

The framework also introduces rules for crypto brokers and intermediaries, measures to curb insider trading and market manipulation, and requirements for firms offering staking services — where users lock up cryptoassets in exchange for rewards. However, best-execution rules that apply to traditional exchanges would not extend to crypto trading venues.

DeFi and Outstanding Policy Questions

Addressing decentralised finance (DeFi), where transactions occur directly between participants without intermediaries, the FCA said it intends to apply the same regulatory principles used in traditional finance, despite the technological challenges involved.

Some regulatory areas remain unresolved. The FCA said it will consult in early 2026 on whether crypto firms should fall under its consumer duty regime — which requires companies to deliver good outcomes for customers — and whether crypto users should have access to the Financial Ombudsman Service.

While the UK has faced criticism for taking a more cautious stance than the US, particularly under the crypto-friendly Trump administration, the FCA maintained that its priority is fostering innovation while ensuring investors fully understand the risks involved.