UK’s FCA to Ease Crypto Rules, Formal Regulation Coming in 2026

The UK’s Financial Conduct Authority (FCA) plans to ease certain regulatory requirements for cryptocurrency companies. It also plans to implement a comprehensive framework in 2026.

FCA executive director David Geale told the Financial Times that traditional finance rules cannot simply be applied to crypto firms.

FCA Adapts Traditional Rules for Crypto Market

David Geale shared the FCA’s approach of exempting cryptocurrency groups from specific traditional finance regulations.

The executive director for payments and digital finance rejected a “lift and drop” strategy for existing rules. The regulator recognizes that cryptocurrencies need different regulatory treatment due to their underlying technology and characteristics.

Several core FCA principles will not apply to crypto trading platforms under the new framework. These exemptions include requirements that firms “conduct business with integrity” and “pay due regard to customer interests.”

The regulator justifies these exemptions by stating that crypto firms typically pose lower systemic risks than banks. Crypto companies will face less stringent requirements regarding senior manager responsibilities and system controls.

The FCA noted challenges in adapting rules to “permissionless” distributed ledger technology used by many cryptocurrencies. The regulator plans to exempt the crypto sector from product oversight and governance rules.

According to the FCA, distributed ledger technology would not be treated as an outsourcing arrangement requiring extra risk management. Companies offering crypto assets will not need to provide customers with cooling-off periods or cancellation rights.

Tougher Operational Risk Standards Address Crypto Security Concerns

The UK’s FCA plans stricter operational risk requirements for crypto firms following recent security breaches.

The $1.5 billion hack of wallet provider Bybit this year showed vulnerabilities in crypto infrastructure. Geale emphasized that crypto businesses face greater exposure to hacking due to their technological reliance.

Operational resilience controls will be strengthened across all crypto firms under the new framework. The regulator noted that 24/7 crypto operations create different challenges compared to traditional finance.

The FCA recognizes that crypto firms depend heavily on technology systems that require strong security measures. Geale stressed that firms setting themselves up as 24/7 businesses must deliver consistent service availability.

The regulator plans to focus on ensuring crypto companies can maintain operations during technical difficulties. These requirements aim to protect consumers from service disruptions that could prevent access to their funds.

Regulatory Balance Supports UK Crypto Market Development

The FCA aims to balance consumer protection with supporting UK crypto market growth opportunities. Geale described the regulatory framework as a “growth opportunity” for the jurisdiction.

US adoption of crypto-friendly policies under President Trump has increased pressure on UK regulators.

The FCA must compete for crypto business and also maintain its consumer protection mandate. The approach attempts to attract international crypto firms without compromising regulatory standards.

UK-based cryptocurrency groups have operated under FCA registration requirements for five years. Current rules focus on anti-money laundering, counterterrorism finance, and know-your-customer compliance. The expanded framework will cover broader operational and market conduct issues.

The regulator dismissed concerns about creating a “halo effect” that might mislead consumers about crypto risks.

Geale noted that other high-risk investments already exist within the regulated framework. The FCA plans to clearly communicate that crypto investments remain high-risk with potential for total loss.

Several regulatory areas remain under consultation, including consumer duty rules and ombudsman service access. The FCA seeks industry feedback on whether crypto customers should receive the same protections as traditional finance clients.