The UK’s Financial Conduct Authority (FCA) has published proposals that would exempt crypto-asset firms from several rules required of traditional financial services companies. Key changes include:
- Waiving rules that demand companies to “conduct business with integrity,” exercise “skill, care and diligence,” and always put customer interests first.
- Relaxed obligations for senior management, systems and controls relative to what banks or large investment platforms must comply with.
- Removing mandatory cooling-off periods for customers before transactions—considered impractical in volatile crypto markets.
- Rethinking whether certain technology usage in crypto (like blockchain nodes etc.) should be treated as “outsourced” operations with extra risk management rules, given the permissionless, decentralized nature of many crypto protocols.
What Will Stay Tight & New Safeguards
- Despite the loosened rules, the FCA is proposing stronger requirements in areas of operational risk, particularly cybersecurity resilience. The recent Bybit hack (~$1.5B) is cited as motivation.
- Some of the existing consumer protection regimes (such as financial promotions and anti-money laundering rules) will continue to apply.
- The proposals are under consultation: firms, industry-bodies, and the public can give feedback. Final rules are expected to come into full effect around 2026.
Why the FCA Is Doing This
- To make the UK more competitive globally in the crypto industry, reducing regulatory burdens that may disincentivize innovation or push firms to relocate.
- Because many traditional finance rules were written with conventional banking or securities firms in mind, which differ significantly from crypto firms in technology, risk profile, business models. The FCA argues “lift and drop” of existing rules is not appropriate.
Potential Risks & Criticism
- Consumer protection might weaken if standards of integrity, advice suitability and customer duty are relaxed. Some consumers could be exposed to higher risk of mis-selling or fraud.
- Crypto firms might still push boundaries or exploit loopholes if oversight is reduced without strong enforcement in critical areas.
- Investor confidence could suffer if waivers are perceived as regulatory “lightness” at the cost of safety.
- Regulatory arbitrage: other jurisdictions might respond in unpredictable ways, possibly leading to cross-border complications.
What to Watch Next
- The FCA consultation period (deadline: November 12, 2025) — responses will shape what rules remain or change. CNA
- Which rules end up being permanently waived, which get modified, and which are kept fully in force.
- How these proposals will affect firms currently operating under stricter rules or preparing to enter the UK market.
- Reactions from consumer protection groups, financial watchdogs, and the crypto industry.
- Implementation timeline — likely full regulatory framework in place by 2026.
