UK FCA eyes rules to align digital assets with TradFi

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The United Kingdom Financial Conduct Authority (FCA), the country’s top finance sector watchdog, is seeking feedback on proposals to establish minimum standards for digital asset firms in line with regulation for the traditional financial (TradFi) sector.

As things stand, in the U.K., digital asset regulation is limited to the financial promotions regime, which has received mixed reviews from market participants, some suggesting it amounts to indirect regulation and dissuades businesses from interacting with digital asset markets.

However, the passage into U.K. law of the Financial Services and Markets Act (FSMA) 2023 gave the FCA, along with the country’s banking sector regulator and Prudential Regulation Authority (PRA), powers to incorporate digital assets into the existing financial services regulatory framework. It also kicked off a consultation process, which has now been running since 2023, on what this regime should look like.

This week’s consultation marks the latest update in the FCA’s ongoing effort to prepare a regulatory framework for digital assets in the U.K., with the aim of being “proportionate” and allowing U.K. firms to compete internationally. In this respect, the consultation proposals also follow draft legislation published by HM Treasury’s in April.

Specifically, the FCA is seeking views from consumers and firms that conduct or interact with digital asset activities on proposals for regulation that would mirror the requirements that already apply to TradFi firms, such as operational resilience and controls to fight crime.

In its September 17 consultation announcement, the FCA said it was also open to a discussion on how the ‘Consumer Duty’—which requires firms to act to deliver good outcomes for their consumers should apply to crypto—would take into account the unique characteristics of digital assets, as well as how complaints should be managed, including whether digital asset consumers should be able to refer them to the Financial Ombudsman Service.

“We want to develop a sustainable and competitive crypto sector – balancing innovation, market integrity and trust,” said David Geale, executive director of payments and digital finance at the FCA. “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.”

He added, “We are working now on what those standards should look like, ahead of legislation to bring it within our regulation.”

Mirroring traditional finance rules

“The proposed new rules and guidance in our Handbook will generally apply to firms, regardless of the specific cryptoasset activities the firm undertakes,” said the FCA. “This aligns cryptoasset firms with standards expected of existing FSMA-authorised firms.”

According to the regulator, the aim is to ensure digital asset firms have the “appropriate systems, controls, processes, financial resources and people in place.”

Consumer Duty and Financial Ombudsman Service

The FCA is also seeking feedback on the application of the Consumer Duty (the Duty), Conduct of Business (COBS) and Product Intervention and Product Governance (PROD) Sourcebooks, and access to the Financial Ombudsman Service for digital asset firms and consumers.

The Consumer Duty sets “higher and clearer standards of consumer protection across financial services and require firms to put their customers’ needs first,” including standards related to products and services, price and value, consumer understanding and consumer support.

Meanwhile, COBS sets the standard for fair, transparent, and professional conduct in U.K. financial services, covering everything from client communications to suitability and best execution, and PROD aims to improve firms’ product oversight and governance processes.

Finally, the Financial Ombudsman Service is a free and “easy-to-use” service that settles complaints between consumers and businesses that provide financial services. Giving digital asset investors and businesses access to this would put them in line with the protections and recourse afforded to other financial services.

The FCA said its goal with these proposals is four-fold: to “support growth,” by designing a regime that allows firms that set up in the U.K. to compete globally; to help consumers by providing appropriate protections, keeping them informed and providing access to products that meet their needs and offer fair value; to provide “a strong line of defense against financial crime”; and to making sure the regulation is effective and proportionate.

The deadline for feedback on the consultation paper is November 12, 2025. The FCA said it will publish final rules in 2026, which will apply once the necessary legislation is in place.

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