FCA Seeks Public Input on Crypto Regulation Amid U.K. Policy Shifts

The United Kingdom’s Financial Conduct Authority (FCA) has initiated a public consultation on critical aspects of the crypto industry, including staking, lending, borrowing, intermediaries, and decentralized finance (DeFi). This move is part of a broader effort to shape the country’s future regulatory framework for cryptocurrencies. The consultation was published in a discussion paper released on Friday, aiming to gather public feedback and shape the regulatory landscape for the growing crypto industry.

The FCA’s request for input follows the U.K. Treasury’s draft legislation announced earlier this week. This legislation seeks to bring specific crypto-related activities under the FCA’s oversight. Once approved, the legislation will expand the FCA’s authority to supervise areas such as crypto exchanges, stablecoin issuance, and DeFi platforms. David Geale, executive director of payments and digital finance at the FCA, emphasized the need for a regulatory regime that balances innovation with market integrity and consumer protection. He stated, “Crypto is a growing industry. Currently largely unregulated, we want to create a crypto regime that gives firms the clarity they need to safely innovate, while delivering appropriate levels of market integrity and consumer protection.”

The government’s broader crypto strategy builds on the Financial Services and Markets Act, passed in 2023, which empowered the Treasury to establish new regulations for digital assets. The U.K. is working to align its regulatory framework with the European Union’s Markets in Crypto-Assets (MiCA) framework, which was implemented in 2023. This alignment aims to position the U.K. as a competitive hub for crypto innovation and investment.

Finance Minister Rachel Reeves recently reiterated the government’s commitment to fostering a competitive digital asset ecosystem. Speaking at Innovate Finance’s Global Summit, Reeves emphasized that the upcoming rules are designed to position the U.K. as a hub for crypto innovation and investment. She also highlighted plans to collaborate with U.S. authorities on responsible digital asset development. The Treasury is inviting technical comments on the draft legislation until May 25 and plans to release further details on rules addressing market abuse, disclosures, and asset admissions in the coming months.

Earlier this year, a coalition of leading UK trade associations called on the government to appoint a special envoy for crypto and develop a comprehensive action plan to support the digital assets and blockchain sector. In a letter addressed to Varun Chandra, the Prime Minister’s special adviser on business and investment, six UK digital economy organizations stressed the need for stronger strategic alignment to unlock investment, growth, and job creation within the crypto industry. The UK government introduced a new bill in September aimed at clarifying the status of digital assets, including non-fungible tokens (NFTs), cryptocurrencies, and carbon credits, as “things” and “personal property” under the nation’s property laws.

The FCA has been actively overseeing crypto activities, focusing on anti-money laundering measures and consumer protection. Last year, the FCA implemented new rules that require crypto firms to register with the financial regulator and have their marketing materials approved by an FCA-authorized firm. Key updates include exchanges providing clear warnings to customers about the risks associated with crypto investments. The FCA’s proactive approach reflects the government’s commitment to fostering a safe and innovative crypto ecosystem in the U.K.