UK FCA invites feedback to its proposals on the regulation of cryptoassets

The Financial Conduct Authority (FCA) has published a discussion paper, on 16 December, on regulating cryptoassets.

More comprehensive conduct regime

In 2023, the previous government announced plans to legislate for a future financial services regime for cryptoassets. The new government confirmed in November 2024 that it planned to legislate to bring certain cryptoasset activities into the FCA’s regulatory perimeter.

As a result, the FCA's regulatory remit for cryptoassets will expand from the current Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 and Financial Promotions regime to a more comprehensive conduct regime, covering cryptoasset trading, regulation of stablecoins, intermediation, custody and other core activities.

To date, the regulator has published DP23/4 Regulating cryptoassets Phase 1: Stablecoins, with separate papers to be published in due course. The FCA's Cryptoassets Roadmap expands on the content and sequencing of future discussion papers and consultation papers. 

In publishing the first document, DP24/4 Regulating cryptoassets: Admissions & Disclosures and Market Abuse Regime for Cryptoassets as part of the Cryptoassets Roadmap, the focus is on advancing a market abuse regime for cryptoassets (MARC) and the admissions and disclosures regime for cryptoassets made available for trading in the UK.

The FCA aims to reduce consumer harms and promote confidence and trust in the UK cryptoasset market by:

• improving market integrity in cryptoassets trading so that there are clear and consistent "rules of the game" for firms and consumers;
• ensuring that consumers have the requisite information before buying or selling cryptoassets;
• requiring controls and processes to bring about fair and orderly trading conditions; and
• further reducing risks of money laundering and losses to fraud.

HM Treasury is expected to introduce legislation to prohibit public offers of cryptoassets in the UK. Alongside that, the FCA's regime will cover the admission of cryptoassets to trading on a regulated cryptoasset trading platform or the making of a public offer of cryptoassets in the UK. There is broad alignment with the existing UK prospectus regime.

Legislation is also expected from HM Treasury in relation to MARC, to prohibit insider dealing in cryptoassets traded on a regulated cryptoasset trading platform, prohibit market manipulation, and require disclosure of inside information relating to traded cryptoassets. Alongside the legislative change, the FCA will aim to deliver a regime which sets out how market participants can meet their obligations in preventing abusive practices and help to identify bad actors as quickly as possible.

How and when can firms respond?

The discussion paper contains 49 questions to which interested stakeholders are invited to respond.

Both UK and international stakeholders may submit feedback to it from now until 14 March 2025, either via form or email.

What next?

The FCA plans to engage with a wide range of stakeholders – both individually and in forums once feedback has been received.

After consideration, any new FCA Handbook rules will be published for consultation in a consultation paper. 

Osborne Clarke comment

While it is slightly unusual that the first publication by the FCA of its Cryptoasset Roadmap is a discussion on admission standards and prevention of market abuse – as opposed to starting with the authorisation regime and what activities will be brought within the regulatory perimeter – it is clear that the FCA is setting out its stall regarding its plan to stamp out improper practices in the cryptoassets industry. In so doing, the FCA hopes to reduce financial crime and improve market integrity, therefore reducing the risk of consumer harm.

Given that the FCA is seeking to adapt existing regimes in respect of market abuse and the admission to trading of traditional financial instruments, it is evident the FCA is seeking to understand in better detail the nuanced risks involved with cryptoasset trading and how best they may be able to be tackled. This is therefore an opportunity for any firms interested in the future regulation of cryptoassets to have their say and help to develop the FCA's policy in this area.

The number and breadth of questions in the discussion paper provides ample scope for both cryptoasset market participants and other interested stakeholders to shape the development of cryptoasset regulation.

Please contact our experts should you wish to discuss responding to the discussion paper.