UK cryptocurrency companies to experience relaxed regulations, with a focus on enhanced cybersecurity supervision.
The Financial Conduct Authority (FCA) in the UK has unveiled plans for a new regulatory framework for crypto companies, aiming to provide a more suitable environment for the industry while maintaining safety and security. According to the FCA's executive, David Geale, these changes will take effect in 2026, following industry feedback.
In a statement made in March 2024, Geale outlined the key aspects of the new framework. Crypto trading platforms will not face the same stringent standards as banks or traditional investment firms, but they will be expected to demonstrate operational resilience, avoid major outages, and protect users from breaches.
Upgrading IT infrastructure to ensure 24/7 readiness for service continuity will be essential for compliance. The FCA will also focus on cybersecurity threats, given recent high-profile hacks like the $1.5 billion Bybit wallet theft. To address this, the FCA will relax rules on senior managers and operational controls for crypto firms.
Despite these relaxations, the FCA argues that the high volatility of crypto assets means that the proposed measures would not provide meaningful protection. However, consumer protection remains a priority, and the FCA is considering whether crypto firms should fall under its consumer duty rules. This would require ensuring users get a fair deal and have recourse to the Financial Ombudsman Service.
The FCA has made it clear that it does not plan to directly copy banking rules for crypto firms. Instead, the rules will be tailored to reflect how crypto operates and the risks involved. The FCA will also not treat crypto transactions using distributed ledger technology with no intermediaries involved as outsourcing, meaning extra oversight will not be required.
Geale also warned that crypto investments still carry a chance of total loss. However, this approach is meant to allow crypto firms to operate more efficiently within a regulated framework. Businesses unable to maintain uptime may face compliance issues under the new framework.
The FCA's plans have been confirmed by The Financial Times, and the regulator is seeking feedback from the industry to help shape the final regulations before they are rolled out. This move is part of the FCA's efforts to create a more conducive environment for crypto firms while ensuring consumer protection and maintaining cybersecurity.
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