FCA Seeks Public Input on Crypto Regulation

The UK's Financial Conduct Authority (FCA) has initiated a public consultation to gather views on crypto assets, marking a significant step towards establishing comprehensive legislation in the sector. The FCA's discussion paper, released recently, seeks input on various aspects of crypto, including intermediaries, staking, lending, borrowing, and decentralized finance (DeFi).

The primary goal of this initiative is to create a clear regulatory framework that fosters confidence and supports the growth of the crypto industry. This move follows a draft paper released by the Treasury, which aims to bring specific crypto activities under the FCA's regulatory purview once the legislation is passed.

David Geale, the executive director of payments and digital finance at the FCA, emphasized the importance of creating a regulatory environment that balances innovation with consumer protection. "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," he stated. Geale further added that the FCA's aim is to drive sustainable, long-term growth of crypto in the UK and to ensure that the regulatory balance is correctly struck.

This public consultation is part of a broader roadmap set by the FCA, which includes other key areas such as market abuse, admissions and disclosures, stablecoins, custody, and prudential considerations. As part of its five-year strategy from 2025 to 2030, the FCA will focus on smarter regulation to support sustained economic growth, help consumers navigate their financial lives, and combat financial crime.

The deadline for public feedback is set for June 13, 2025. Following the collection of this input, the FCA will consult on the final regulatory regime, with the finalized plan expected to be released later this year. The FCA's call for public input has been welcomed by industry experts, who see it as a positive step towards creating a balanced regulatory environment that supports innovation while ensuring consumer protection and market integrity.

Hannah Meakin, a partner at a prominent law firm, highlighted the significance of the FCA's approach. "The discussion about potential requirements for cryptoasset exchanges demonstrates some creativity and sophistication of thinking about how to balance the multiple objectives of user, industry, and regulator," she noted. Meakin also pointed out the FCA's consideration of credit use for purchasing cryptoassets, reflecting the authority's commitment to consumer protection and market integrity. She concluded that while the FCA's efforts to balance innovation with oversight are commendable, the true test will be in the effectiveness of the final regulatory framework.