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UK Prepares for Crypto Regulation
The UK Financial Conduct Authority (FCA) is moving closer to regulating crypto assets, with full implementation expected by 2026. As part of this effort, the FCA has released a discussion paper addressing transparency, disclosures, and market abuse in the crypto industry.
Expanding FCA’s Authority
Under the government’s plan, the FCA will oversee more than just anti-money laundering and promotional practices. Its new responsibilities will include crypto trading, stablecoin regulation, custody, and intermediation.
Some crypto-related financial instruments, such as security tokens and tokenized assets, are already regulated under the Financial Services and Markets Act 2000 (FSMA). For new crypto offerings, public sales will generally be banned unless they qualify for specific exemptions, such as being listed on a regulated Crypto Asset Trading Platform (CATP) or being available only to institutional investors.
To ensure compliance, the FCA will enforce strict disclosure standards. If these standards are violated, the FCA could require firms to compensate affected investors.
Addressing Market Abuse
Traditional financial markets in the UK are governed by a civil market abuse regime. However, this system cannot be directly applied to crypto assets. The FCA is instead looking to international standards, such as those set by the International Organization of Securities Commissions (IOSCO), for guidance.
The government also plans to allow cross-platform sharing of information to combat market abuse. For example, if a user is banned from one platform for suspected abuse, that information could be shared with other platforms to help them make better decisions.
Next Steps
The FCA is currently accepting feedback on 49 questions in its discussion paper, particularly from stakeholders in the wholesale sector. Feedback will be open until March 14, 2025.
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