UK Crypto Regulation Enters Final Stage with FCA Rules

• Consultation Closed: The final consultation period for the proposed rules concluded on February 12, 2026.
• Authorisation Gateway Opens: Firms must prepare to submit applications for authorisation starting in September 2026, according to the FCA’s operational guidance.
• Regulated Activities: The new perimeter captures seven key activities, including issuing stablecoins, safeguarding assets, operating trading platforms, dealing as principal or agent, arranging deals, and staking.
• Territorial Scope: The regime applies to UK-based firms and has significant extraterritorial reach, capturing overseas firms that provide services to UK retail clients.
• Change of Control Threshold: Acquiring 20% or more of the shares or voting power in an FCA-authorised crypto firm will require pre-approval from the regulator.

This marks a fundamental shift from a relatively light-touch regulatory environment to a full-scale, prudential regime under the Financial Services and Markets Act (FSMA). For crypto firms operating in or targeting the UK, the era of regulatory ambiguity is over. The framework imports established concepts from traditional finance, such as the Internal Capital Adequacy and Risk Assessment (ICARA) process for capital requirements, the Senior Managers and Certification Regime (SMCR) for governance, and a dedicated Market Abuse Regulation (MAR) for cryptoassets.

The introduction of requirements for a Qualifying Cryptoasset Disclosure Document (QCDD) before an asset is admitted to trading imposes a significant due diligence and transparency burden on platforms, akin to prospectus requirements in securities markets. Furthermore, the FCA’s baseline expectation that overseas firms operate via a UK subsidiary—rather than a branch—presents a substantial operational and structural hurdle for international players targeting UK retail investors. This move is designed to ensure the FCA has direct supervisory oversight and enforcement capabilities.

While the goal is to enhance market integrity and consumer protection, the stringency of the new rules carries risks. The high cost and complexity of achieving and maintaining FCA authorisation could create significant barriers to entry for startups and smaller innovators, potentially stifling competition and driving some activity offshore or underground. There is also considerable uncertainty regarding the practical application of an “equivalence” or “substitutive compliance” mechanism for overseas firms.

If the UK’s assessment of other jurisdictions’ regulations is slow or overly strict, it could lead to market fragmentation, disadvantaging UK investors and isolating the UK market. The detailed definitions of regulated activities, such as “arranging,” may also create gray areas that require further clarification from the FCA to avoid inadvertently capturing activities like software development or non-custodial services.

The most critical development to monitor will be the FCA’s final rulebook and guidance, expected after the closure of the consultation period. This will provide the granular detail firms need to finalize their implementation plans. Industry engagement with the FCA’s planned information sessions and pre-application support will be a key indicator of market readiness. How the first wave of applications is handled after the gateway opens in September 2026 will set the precedent for the entire sector.

For international firms, the development of the equivalence framework is paramount. Any announcements from HM Treasury or the FCA on mutual recognition or comparability assessments with jurisdictions like the EU, Singapore, or Switzerland will be closely watched. Finally, observing how the FCA enforces the new market abuse regime will demonstrate the regulator’s appetite for intervention and set the tone for compliance across the industry.

• Scope Assessment is Urgent: Firms must immediately assess whether their current and planned activities, including those conducted overseas for UK retail clients, fall within the new regulatory perimeter.
• Authorisation is Non-Negotiable: Businesses must begin preparing their FCA authorisation applications now to be ready for the September 2026 submission window, treating it as a complex, resource-intensive project.
• Governance Overhaul Required: Compliance requires implementing TradFi-grade systems and controls for governance (SMCR), risk management, client asset protection (CASS), and operational resilience.
• Market Integrity is a Focus: Firms will need to invest in sophisticated market surveillance systems to detect and report potential market abuse, aligning with standards long-established in traditional markets.
• Senior Management is Accountable: Leadership must be fully engaged in the transition, with clear lines of responsibility for implementation planning and ongoing compliance oversight.