Rahman Ravelli | Syedur Rahman and Ulrich Schmidt

United Kingdom

Syedur Rahman and Ulrich Schmidt detail the advice being offered by the UK’s Financial Conduct Authority to those that will be subject to its crypto regulation.

With the UK’s crypto asset regulatory regime expected to come into effect next year, the Financial Conduct Authority (FCA) has posted information for firms that it will affect.

Firms that want to undertake crypto asset regulated activities will need to be authorised by the FCA under the Financial Services and Markets Act 2000 (Cryptoassets) Regulations 2025 (FSMA) when the new regime comes into force. In order to become authorised by the FCA, firms will have to prepare detailed regulatory business plans and submit a large amount of documentation containing information on their policies, financial projections, personnel details and compliance rules that are in place.

Becoming authorised is, therefore, a difficult process, requiring a lot of work. With that in mind, the FCA has published information to help firms prepare for the regime’s introduction.

The information covers subjects including:

  • Details of the crypto asset activities that will be regulated.
  • The FCA’s standards for crypto asset firms and individuals.
  • The approach to be taken by the FCA regarding authorisation, supervision and enforcement.
  • The gateway for firms that want to undertake crypto asset activities.
  • A proposed transitional provision that will allow existing crypto asset firms that fail to secure authorisation to wind down their UK business in an orderly manner.

Consultations

The FCA has stated that it will continue to publish further policy consultations setting out its proposed rules and guidance, with a deadline for the submission of responses set for 12 February 2026. After considering the responses to these consultations, the FCA will set out its final rules and guidance in policy statements before the new regime is implemented.

Four months ago, the FCA said it expected to publish final rules in 2026 that would promote good business practices among cryptocurrency firms. These rules (many of which already apply in the traditional financial sector) will extend the FCA’s regulatory remit to protection of customers from bad business practices and help build trust in the crypto sector while ensuring firms within it are both resilient and ready to tackle the risk of crime.

Timescale

In what may be of most interest to many, the FCA has given information about the timescale for applying for the UK’s cryptoasset licensing regime. With the new regime widely expected to be going live on 25 October 2027, firms will need to submit applications for it to obtain a licence.

The FCA has now stated that it expects to open the application gateway this September, although it has not said how long the application period will last. All crypto firms – including any already registered with the FCA under money laundering regulations – will need to apply for a licence. Those firms that have a licence to carry on traditional financial services will have to seek permission to vary this in order to conduct crypto-related activities.

Those firms that apply during the application gateway period are expected to have had their application determined before the regime comes into force. If for some reason the FCA does not approve such a firm’s application before the regime starts, the firm will be able to carry on with crypto activities in the UK until the FCA determines the application.

In simple terms, applying during the application gateway period gives a firm the knowledge that it can continue its crypto services without any disruption after the regime takes effect in October 2027; providing its application is not rejected by the FCA prior to this.

Any firm applying outside the application period may not be authorised in time, which would see it subject to a transitional period while the FCA decides on its application. This would mean the firm would be able to run off pre-existing contracts but unable to carry out any new UK business after October 2027 until they are authorised. But this period will not be made available to firms that have not applied before October 2027.

Opportunity

The planned crypto regime represents a huge opportunity to develop a more comprehensive framework for crypto regulation in the UK. Any regime will necessarily involve certain trade-offs. The rules on capturing non-UK firms that provide the new types of regulated activities to UK persons allow for more consumer protection, whilst opening the UK to more global crypto firms brings a heightened risk of financial crime. The complexity of the regime echoes the complexity of the market.

There are certain issues regarding the crypto market that regulators across the globe have to face; most notably ensuring there is no risk of over-regulation (which can stifle innovation and hurt smaller players) while, at the same time, providing adequate consumer protection.

With the rise of stablecoins, there should be clearer and more direct regulation regarding them, to ensure that this emerging area of the crypto sector is allowed to grow while being adequately regulated.

This article first appeared on Lexology | Source