UK FCA to Reshape Crypto Regulations with New Authorization Process

• The Financial Conduct Authority plans to introduce a crypto market framework in 2026 covering stablecoins, trading platforms, staking, and prudential exposure.
• According to Matthew Long, the regulatory regime is expected to introduce a new authorization process for crypto companies.

The United Kingdom’s Financial Conduct Authority (FCA) is set to introduce a comprehensive regulatory framework for crypto assets, aiming for full implementation by 2026. This initiative seeks to balance consumer protection with the growth of the crypto market.

Historically, the FCA’s involvement in the crypto sector was primarily focused on anti-money laundering (AML) measures and financial promotions. However, the forthcoming regulatory framework will significantly expand the FCA’s authority to cover a broader range of crypto activities, including crypto trading, stablecoins, intermediation, and custody services. As a result, companies such as Coinbase, Gemini, and Bitpanda will need to undergo a new approval process with the FCA rather than simply registering for AML compliance.

Matthew Long, FCA Director of Payments and Digital Assets, stated during an interview with Coindesk,

We will have a gateway which will allow authorization. But obviously, we’ve got to go through those consultations, create those rules, and get the legislation for that to take place,

Since launching its anti-money laundering (AML) register in 2020, the FCA has received 368 applications from companies seeking compliance; however, only 50 firms (14%) have been approved so far. The remaining applications were either withdrawn, rejected, or are still under review. Due to the FCA’s stringent requirements, many crypto firms struggle to gain registration, forcing some to shut down their UK operations or relocate to other jurisdictions.

Expansion of FCA’s Role

In 2023, the former UK government published policy papers indicating that regulated activities in the crypto sector would likely include crypto and fiat-referenced stablecoin issuance, payment and exchange services, and crypto lending activities. By regulating these activities, the UK intended to minimize risks associated with fraud, insolvencies, and market instability, which have been significant concerns in the crypto sector following major collapses like FTX and TerraUSD in 2022.

However, in November 2023, former Economic Secretary Tulip Siddiq clarified that stablecoins would not be brought under UK payment regulations as previously planned. The FCA now plans to consult on draft rules for stablecoins early this year.

According to Matthew, it remains unclear what steps will be required for companies already registered under AML regulations to transition to the new system. Firms seeking additional permissions will likely need to apply separately, potentially leading to a longer registration process, even for those already holding existing licenses.

To ensure a smooth transition, the FCA aims to provide clear guidance on the new authorization gateway before its official launch and implement the rules as quickly as possible. In shaping its regulatory approach, the FCA will consider European crypto regulations and recommendations from the International Organization of Securities Commissions (IOSCO). Additionally, FCA is expected to consider approaches to stablecoin regulation, including the EU’s Markets in Crypto-Assets (MiCA) framework, which establishes clear rules for stablecoin issuers and payments.

 “It’s about understanding and looking for best practices,” Long stated, emphasizing the FCA’s commitment to aligning with global standards while ensuring effective oversight of the UK’s crypto market.