FCA Crypto Regulation Framework – Key Compliance Guidelines [2025]

Lee Werrell

8 months ago

The Financial Conduct Authority (FCA) regulates crypto-assets in the UK primarily through its focus on consumer protection, market integrity, and the prevention of financial crime through the FCA Crypto Regulation Framework. While the FCA does not comprehensively regulate all crypto-assets, it does oversee specific activities and entities operating in the crypto-asset market.

Below are the key elements to the FCA Crypto Regulation Framework and its approaches:

1. AML/CTF Regulation

The FCA oversees crypto-asset firms under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (as amended):

Scope: This regulation applies to businesses carrying out crypto-asset exchange services, wallet providers, and firms facilitating transfers or custody of crypto-assets.
Requirements:
- Registration with the FCA is mandatory.
- Firms must comply with anti-money laundering (AML) and counter-terrorist financing (CTF) requirements, including customer due diligence (CDD), transaction monitoring, and reporting suspicious activity.

2. Financial Promotions and Marketing Rules

FCA Powers: From 8 October 2023, the FCA enforces its financial promotion rules on crypto-asset firms, ensuring marketing materials are fair, clear, and not misleading.
Compliance Obligations: Promotions must adhere to the Consumer Duty and specific guidelines on risk disclosures and appropriate wording.
Firms engaging in promotions without proper authorisation or without meeting these standards may face enforcement action.

3. Regulation of Security Tokens

Crypto-assets classified as securities (e.g., security tokens) fall under the FCA’s Financial Services and Markets Act 2000 (FSMA) framework.
Security tokens may be subject to:
- Prospectus requirements.
- Ongoing obligations under the Market Abuse Regulation (MAR).
- Regulations applicable to trading venues where security tokens are traded.

4. Stablecoins

The FCA intends to bring stablecoins used as a means of payment under a bespoke regulatory regime, aligned with the Financial Services and Markets Act 2023 (FSMA 2023). This includes prudential, conduct, and redemption requirements for stablecoin issuers.

5. Consumer Protection: Consumer Duty and Complaints

The FCA’s Consumer Duty requires firms offering crypto-assets to retail consumers to ensure they deliver good outcomes and safeguard against exploitation or harm.
Crypto-asset firms must have clear procedures for handling complaints.

6. FCA Warnings and Unauthorised Firms

The FCA maintains a Warning List of unregistered or unauthorised crypto-asset firms that pose risks to consumers.
Consumers are advised to avoid unregistered firms and ensure any crypto service provider is listed on the FCA’s Crypto-Asset Register.

7. Future Regulation

The FCA’s regulation of crypto-assets is evolving in response to the UK Treasury’s proposals for a more comprehensive regulatory framework. This includes bringing activities such as crypto-lending, trading, and decentralised finance (DeFi) under enhanced regulatory oversight.

Key Challenges and Risks Addressed

The FCA’s regulatory approach aims to:

Mitigate risks related to fraud, market abuse, and consumer harm.
Enhance transparency in the crypto-asset market.
Address systemic risks associated with stablecoins and other crypto-assets with significant adoption.

For more information, refer to the FCA’s Policy Statements, Consultation Papers, and updates on the regulation of crypto-assets on the FCA website.

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Lee Werrell

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