The UK financial regulator has watered down its capital and disclosure requirements for crypto companies as it presented landmark rules for the country’s digital asset industry.
The Financial Conduct Authority’s decision to dilute its first full set of rules for crypto companies came after complaints from the sector that its initial proposals were too onerous and risked holding back the UK in the fast-growing market.
Setting out a regulatory framework that will apply to UK crypto companies from October 2027, the FCA said it had lowered the capital requirements to cover the specific risks of stablecoin issuers and crypto trading companies.
Smaller companies and those with less risky activities will also be freed from having to publicly disclose their capital requirements, the FCA said, ditching a blanket disclosure rule. The regulator estimated its rules would add 3mn to 4mn customers to UK crypto markets by boosting confidence.
“This is about giving crypto a solid foundation from which to build,” said David Geale, executive director for payments and digital finance at the FCA, adding: “This crypto regime is the biggest change in the FCA scope for at least a decade.”
“We can’t regulate away risk. Crypto does remain a high-risk investment and it’s important that consumers know what they’re getting into,” he said, adding: “There’s no reason why people shouldn’t have a proportion of their portfolio in high-risk assets.”
Renuka Rawlins, director of policy and government relations at industry body the Payments Association, said the FCA’s reworked rules were “encouraging”, adding that “the regulator has actively listened to our members’ feedback, introducing much-needed adjustments that replace rigid complexity with commercial workability”.
British officials have for years faced criticism over what executives perceived as a slow and cautious approach to the crypto sector, especially after Donald Trump returned as US president and encouraged a light-touch regulatory approach to the industry.
Under Trump, US officials passed stablecoin rules into law last year but they are still debating the Clarity Act, which would oversee the wider crypto market. The EU’s Markets in Crypto-Assets Regulation came into force at the end of 2024.
But after pressure from crypto executives and politicians, UK regulators have recently shifted their rules in a more industry-friendly direction.
Stablecoins, tokens pegged to sovereign currencies such as the pound or dollar, will be jointly regulated by the FCA and the Bank of England. Last week, the central bank announced it was ditching or diluting some of its most unpopular proposals for the largest stablecoins.
On Monday, the FCA said it had halved how much extra capital issuers of non-systemic stablecoins will need from 2 per cent of their overall issuance to 1 per cent.
Companies owning crypto tokens as part of their trading book will need to have capital covering 40 per cent of their net exposure value, the FCA said, as it ditched an earlier proposal for some riskier tokens to attract a 100 per cent capital requirement.
“We have listened to what works and we’ve listened to what doesn’t work,” said Geale. “We got feedback on capital that we were starting a bit high.”
The regulator also eased its rules on liquidity requirements, intragroup custody as well as pre-trade transparency for crypto groups.
The FCA said it would consult later this year on guidance for the decentralised finance (defi) sector, a largely unregulated part of the industry where automated contracts are used to replace traditional intermediaries and in some cases no single entity controls users’ funds.
Thieves stole more than $500mn from two defi companies in high-profile hacking incidents this year, exacerbating concerns about the security of that part of the crypto industry.
“An awful lot of discussions around defi do end up with an element of [centralised finance],” said Matthew Long, director of payments and digital assets at the FCA, adding that the rules will apply whenever there is an “identifiable controlling entity” that can be regulated.
For the past six years, crypto companies were required to register with the FCA to check compliance with its rules against money laundering and terrorism finance. Many of the 62 companies that registered are expected to seek a full licence under the new regime.
From September 30, crypto companies operating in the UK can apply to be regulated under the FCA’s rules, which will come into force from 25 October 2027.
