UK Regulators Seek Balance Between Crypto Innovation and Consumer Trust

The UK Financial Conduct Authority (FCA) has initiated a consultation on whether crypto firms should be subject to the same regulatory standards as traditional financial institutions, with potential exemptions tailored to the unique characteristics of the crypto sector. The consultation paper, CP25/25, seeks to establish a regulatory framework that promotes innovation while ensuring market integrity and consumer trust. This initiative aligns with the UK’s broader strategy to integrate crypto into the financial services regulatory regime.

The FCA is considering how to apply existing FCA Handbook rules to cryptoasset activities, including governance obligations, systems to combat financial crime, and measures to ensure operational resilience. Environmental, social, and governance (ESG) requirements may also be introduced. A central focus of the consultation is the applicability of the FCA’s Consumer Duty to the crypto sector. The principle mandates that firms act in ways that deliver good outcomes for customers. The regulator is also seeking views on how to handle complaints, including whether consumers should have the ability to refer disputes to the Financial Ombudsman Service.

The FCA’s proposals aim to set minimum standards for crypto firms, allowing them to meet common standards without removing the inherent risks of crypto investing. David Geale, the FCA’s executive director of payments and digital finance, emphasized that while the proposals will not eliminate investment risks, they will help build trust in the sector. The FCA is also planning a series of in-person and virtual events to support industry engagement and gather feedback from a wide range of stakeholders, including crypto firms, trade groups, and policymakers.

The consultation process has two key deadlines: stakeholders must submit comments on discussion topics such as consumer duty and complaints handling by October 15, 2025. Responses to the broader consultation proposals are due by November 12, 2025. The FCA will review all input and publish final rules in 2026. This development follows the FCA lifting its ban on crypto exchange-traded notes (ETNs) for retail investors starting October 8, allowing access to ETNs listed on FCA-recognized UK exchanges under strict promotion rules.

The UK’s approach to crypto regulation is evolving, with the FCA proposing a 2026 “gateway regime” to authorize crypto firms and finalize rules for stablecoins and custody. The UK is also collaborating with the United States on digital asset regulations, with Chancellor Rachel Reeves and US Treasury Secretary Scott Bessent discussing ways to strengthen coordination on crypto. This collaboration includes engaging with major crypto firms and traditional financial institutions. The UK’s regulatory framework could set a benchmark for how jurisdictions balance innovation with consumer protection.