Cryptocurrency in the UK is getting clearer rules: the UK Financial Conduct Authority (FCA) has introduced a new approach to regulating digital assets, which could support global liquidity and institutional interest. But for companies, the main question remains: how complex and predictable will it be to obtain permissions from the FCA?
What the New FCA Approach Changes
The FCA, or Financial Conduct Authority, oversees the operation of financial markets, protects consumers, and ensures that financial services remain fair and transparent. In the crypto sector, the FCA regulates certain types of activities with cryptoassets, but not every cryptocurrency and not every transaction automatically falls under its supervision.
This week, the UK financial regulator introduced a framework for the crypto market, and the initial industry assessments were mostly positive. Market participants saw it as an attempt to make the UK a more attractive jurisdiction for businesses working with digital assets at the international level.
The key idea of the rules is not to cut off UK clients from global liquidity. The new framework allows access to foreign trading platforms and does not close off the circulation of stablecoins issued outside the UK. For the market, this is an important signal: the regulator is not seeking to completely isolate local infrastructure from the global one.
The UK system relies on existing FCA requirements, including registration under anti-money laundering rules, and on a new regime under the Financial Services and Markets Act. The focus may be on different types of cryptoassets: stablecoins, security tokens, utility tokens, and operations on crypto trading platforms, if they fall under specific rules.
The publication of the FCA’s final rules on cryptoassets was an important step toward greater regulatory clarity and a strong result for the UK’s competitiveness in digital asset innovation, said Katy Harris, head of European policy at Coinbase.
This approach is noticeably different from the European Union model under MiCA. The main difference is how freely companies will be able to connect the local market to global infrastructure.
- United Kingdom (FCA): focuses on access to foreign trading platforms and global liquidity through authorized local structures.
- EU (MiCA): perceived by part of the industry as a more protectionist regime, pushing companies to separate operations and liquidity pools within Europe.
- Requirements for companies: the UK approach promises more commercial flexibility but maintains a strict filter at the authorization stage.
Global Liquidity Instead of an Isolated Market
One of the most notable elements of the UK scheme is the Qualifying Cryptoasset Trading Platform, or QCATP, model. According to Christopher Collins, partner for financial markets and regulation at Katten Muchin Rosenman, it should allow foreign exchanges to serve UK clients through locally authorized structures while maintaining a connection with the already operating global trading infrastructure.
The strength of this model is that UK clients will be able to access deep global liquidity on an offshore platform, rather than a separate UK pool. This should provide better price formation and better results for local clients, noted Christopher Collins.
But this is where one of the main gaps arises. The FCA indicated that foreign divisions will be able to obtain authorization only if their registration jurisdiction provides a comparable level of regulatory protection. However, the list of countries that will meet this criterion has not yet been determined.
This is not enough for companies to build a business model, emphasized Christopher Collins. According to him, businesses need more certainty before they start investing in operations in the UK.
DeFi Remains an Open Question
Katy Harris also drew attention to decentralized finance. In her opinion, previous proposals could have effectively restricted centralized platforms from providing access to DeFi applications.
The UK’s future approach to DeFi will be crucial, said Katy Harris.
She warned that excessive restrictions could distance the country from jurisdictions where regulators are studying DeFi as part of a broader tokenization agenda. In this sense, innovation can only be supported if the rules do not block new models of access to financial infrastructure.
Licensing May Become the Main Challenge
Even if the framework itself looks promising, companies will have to go through a difficult process to obtain permissions. Thomas Catty, partner at the law firm Gherson Solicitors, warned of a high risk of refusals for businesses applying under the new Financial Services and Markets Act regime.
The current registration procedure under the FCA’s anti-money laundering requirements is already much narrower in scope, but remains extremely strict: the regulator rejects or forces the withdrawal of more than 85% of applications, noted Thomas Catty.
The new system will be broader and stricter. For crypto companies, several blocks of requirements will be key:
- Anti-money laundering: the company must show how it identifies and mitigates the risks of illegal operations.
- Consumer obligations: businesses will have to consider client protection and the transparency of their services.
- Prudential requirements: the FCA will assess the financial stability and ability of the company to fulfill obligations.
- Operational resilience: reliable processes, risk control, and readiness to operate without disruptions are important.
- Responsibility of senior management: executives must be responsible for management, control, and compliance.
Registration with the FCA begins with preparing an application: the company needs to describe its business model, cryptoassets and services, present procedures for anti-money laundering, consumer protection, operational resilience, and management. After submission, the FCA reviews the documents, may request clarifications, and only then makes a decision on registration or authorization.
The FCA has several levers of influence on the crypto market: the regulator issues permits, supervises, publishes warnings, applies sanctions, and can prohibit activities for companies that do not meet requirements.
Thomas Catty also warned companies against waiting until the last minute. He recalled the launch of MiCA in Europe, where many firms delayed submitting documents until the deadlines approached. This led to overloaded licensing procedures, and some businesses did not manage to obtain permits in time.
Why Legal Clarity Matters for Institutional Investors
For institutional participants, the new rules are important not only as another set of requirements for the crypto market. Sandy Jones, director of digital assets at Baillie Gifford, believes that regulation itself does not make cryptocurrencies safer but creates basic conditions without which traditional financial organizations are not ready to implement blockchain infrastructure.
For such players, the following are especially important:
- Legal certainty.
- Operational resilience.
- Quality management.
- Rules recognized by investors and institutions.
The basic technology is strong, but by itself it does not open a direct road to major financial markets. Legal certainty, operational resilience, quality management, and rules recognized by investors and institutions are needed, said Sandy Jones.
Sandy Jones also positively assessed the latest FCA changes in the approach to stablecoins. According to him, they help build a reliable settlement infrastructure without excessive operational barriers.
What Risks Remain for Investors
Even with clearer rules, cryptocurrencies remain a risky asset. For investors in the UK, the main threats are related not only to regulation but also to the very nature of the market.
- High volatility: the price of cryptoassets can change sharply in a short time.
- Lack of guarantees: investments in cryptocurrencies do not provide guaranteed returns.
- Risk of loss of funds: an investor can lose a significant part or all of their investment.
- Limited FSCS protection: the compensation scheme usually does not cover losses on cryptoassets.
- Fraud: risks of unscrupulous projects, phishing, and client deception remain in the market.
The UK Bets on Pragmatism
The market reaction shows that the FCA is trying to present the UK as a more commercially flexible alternative to the European MiCA regime. For crypto companies, this could be a significant argument, especially if access to global liquidity is indeed maintained in practice.
However, the final business choice will depend not only on the stated regulatory goals. Much more important is how predictably the regulator will apply the new rules in the coming months.
The main task for the UK now is to ensure that complex authorization and unresolved policy issues do not undermine the competitive advantages of the new regime before they can manifest.
{
“@context”: “https://schema.org”,
“@type”: “Article”,
“about”: [
{
“@type”: “Place”,
“name”: “United Kingdom”
},
{
“@type”: “Organization”,
“name”: “FCA”
},
{
“@type”: “Thing”,
“name”: “cryptocurrency”
}
]
}
