backOn 17 September 2025, the Financial Conduct Authority (“FCA”) published a consultation paper (CP25/25) on the application of the FCA Handbook in relation to regulated cryptoasset activities (the “CP”) and issued advice on high-level standards, supervision, systems and controls and business standards to cryptoasset firms and on draft non-Handbook guidance relating to operational resilience.
Background
The intended manner of regulating cryptoasset business is by expanding the existing regime to include certain activities related to dealing in cryptoassets as part of the “regulated activities” framework. HM Treasury’s plan is to amend the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (SI 2001/544) (“RAO”) to include the following as regulated activities:
- issuing qualifying stablecoin in the UK;
- safeguarding of qualifying cryptoassets and relevant specified investments;
- operating a qualifying cryptoasset trading platform;
- dealing in cryptoassets as principal;
- dealing in cryptoassets as agent;
- arranging deals in qualifying cryptoassets; and
- qualifying cryptoasset staking.
The amended draft RAO is currently before Parliament for the approval of both Houses.
Consultation Paper
The CP tests the public’s appetite for the way FCA intends to apply existing regulatory practices to crypto businesses.
Chapter 2 of the CP seeks views on the application of the “High-Level Standards” – a set of fundamental principles and conditions outlined in the FCA Handbook that firms must adhere to. These include the Threshold Conditions (“COND”) that establish the minimum regulatory requirements financial firms must meet to become FCA authorised and the General Provisions (“GEN”) which provides guidance on how FCA guidance is to be interpreted. At this stage the FCA has stated that it intends to apply COND and GEN to crypto businesses in the same manner as it does to other firms.
What is seen as a controversial delineation is with respect to the application of the Principles of Business (“PRIN”) – a set of 12 obligations and overarching standards all firms must follow when conducting financial services in the UK. The FCA has proposed not to apply Principles 1 (“Integrity”), 2 (“Skill, care and diligence”), 6 (“Customer’s interests”) and 9 (“Customers: relationships of trust”) to cryptasset trading platforms (“CATPs”).1Financial Conduct Authority, Consultation Paper – Application of FCA Handbook for Regulated Cryptoasset Activities (CP25/25, 17 September 2025), para. 2.10. The regulator has justified this stance by stating that “[t]his is similar to the position of transactions on multi-lateral trading venues in traditional finance”.2 ibid. Moreover, the FCA has reserved consulting on Principle 12 (“Consumer Duty”) to a later consultation paper, and has stated that it will not apply the principle to crypto-related activities either at this time. However, it expressed it views in the general discussion on this topic in Chapter 6 of the CP, as explained below.3 ibid., para. 2.12.
Chapter 3 of the CP seeks views on the application of the Senior Management Arrangements, Systems and Controls Sourcebook (“SYSC”) part of the FCA Handbook which sets out rules for how firms must organise their businesses, manage risk and maintain effective internal systems and controls to ensure responsible conduct and consumer protection. The FCA intends to apply SYSC and related guidance in full to crypto businesses, with special importance attaching to SYSC 15A (“Operational Resilience”) given the sector's reliance on technical infrastructure. This is unfolded in more detail under Chapter 4 of the CP in which the FCA seeks views on non-Handbook guidance on how to assist firms to implement SYSC 15A and covers issues such as:
- identifying important business services;
- setting impact tolerances;
- mapping exercises; and
- conducting scenario planning and testing.
In Chapter 5, the FCA seeks feedback on the application of the ESG sourcebook to crypto businesses, noting that it intends to apply its provisions on par with other authorised firms. Some commentators see the FCA’s refusal to not introduce new crypto-specific climate related regulations as a shortcoming, considering the energy consumption of certain crypto activities such as Bitcoin mining.
Chapter 6 seeks views on applying the Consumer Duty and whether customers of crypto businesses should be able to refer complaints to the Financial Ombudsman Service (“FOS”). The process currently allows consumers (and certain other “eligible complainants”) of FCA-regulated firms to refer their complaints to the FOS if they are dissatisfied with how these are handles by the firm. One of the options is to apply the Consumer Duty to crypto firms but with additional guidance tailored to the nature of crypto-related activities. This would include extending access to the FOS for complaints stemming from dissatisfied customers of crypto firms. Another option is not to apply the Duty, but to introduce rules that would achieve an appropriate standard of consumer protection for regulated cryptoasset activities.
Lastly, Chapter 7 of the CP focuses on whether the Conduct of Business Sourcebook (“COBS”) which includes rules dictating how firms must conduct themselves when dealing with clients and marketing products in the UK should apply to crypto firms and, if so, the most appropriate approach. The FCA has also suggested that relying on the Consumer Duty may be more suitable. Similarly, it has also been proposed not to apply the Product Intervention and Product Governance Sourcebook (“PROD”).
Next Steps and Relevant Deadlines
Responses to Chapters 1-5 of the CP must be submitted by 12 November whereas responses relating to Chapters 6 and 7 were due by 15 October.
As mentioned above, the FCA will likely issue a further consultation paper on outstanding topics such as whether to apply the Consumer Duty to crypto businesses and the application of COBS and PROD.