As 2025 drew to a close, the Financial Conduct Authority (FCA) published three consultation papers setting out detailed proposals for regulating cryptoasset activities in the UK: CP25/40 on regulating cryptoasset activities, CP25/41 on admissions and disclosures, and the market abuse regime for cryptoassets and CP25/42 on a prudential regime for cryptoasset firms.
Background
The regulatory momentum around cryptoassets in the UK is gathering considerable pace, reflecting the government's ambition to establish the UK "as a global hub for digital assets."
Published on 16 December 2025, the latest batch of consultation papers (CPs) follow the publication the day before of the Financial Services and Markets Act 2000 (Cryptoassets) Regulations 2025 (Regulations), which we referred to in our quick read article here.
The Regulations introduce new regulated activities relating to cryptoassets, a designated activity regime for public offers, admissions to trading, and market abuse, and give the FCA rulemaking, supervisory and enforcement powers. Firms that want to carry out any of the new cryptoasset regulated activities will need to be authorised by the FCA. The new regime is expected to come into force on 25 October 2025. The Regulations enable the FCA to set a period ahead of the commencement of the regime for businesses to submit applications to the FCA. The FCA announced on 8 January 2026 that it expects this application period to open in September 2026.
The CPs form part of the FCA's crypto roadmap and build on feedback from earlier discussion papers and consumer and behavioural research published alongside the CPs. They follow consultations on stablecoins and cryptoasset custody (May 2025) and on conduct of business and high-level standards (September 2025).
Overview of CPs
| Consultation paper |
Key topics |
What it covers |
| CP25/40: regulating cryptoasset activities |
- Cryptoasset trading platforms (CATPs).
- Intermediaries.
- Lending and borrowing (L&B).
- Staking.
- Decentralised finance (DeFi).
|
- Standards for exchanges to keep trading safe and reliable.
- Requirements for brokers and other intermediaries, so they act responsibly.
- Rules to protect both crypto lenders and borrowers.
- Making sure the risks are clear when firms offer staking services.
- Approach to DeFi, where people can trade, lend and borrow using crypto without an intermediary.
|
| CP25/41: admissions, disclosures and market abuse regime for cryptoassets |
- Admissions and disclosures.
- Market abuse.
|
- Rules for listing cryptoassets and what firms must tell investors, so people have the facts before they invest.
- Measures to stop insider trading and manipulation, so markets are fair.
|
| CP25/42: a prudential regime for cryptoasset firms |
|
- Financial safeguards for firms, allowing them to better manage risk.
|
This consultation sets out the FCA's proposals for regulating five new cryptoasset activities:
- operating CATPs
- cryptoasset intermediation
- cryptoasset L&B
- cryptoasset staking
- DeFi where there is a controlling person.
The FCA has developed its proposals based on feedback to its discussion paper DP25/1 published early last year.
The FCA proposes a proportionate regulatory framework that balances consumer protection with fostering innovation and international competitiveness, adapting existing principles-based rules from traditional financial services whilst recognising the unique characteristics of cryptoassets.
Key proposals by activity
| Activity |
Key requirements |
| Cryptoasset trading platforms |
- UK presence and authorisation required.
- Non-discriminatory access rules and mitigating the risks from direct retail access to UK CATPs.
- Pre- and post-trade transparency obligations for larger platforms (≥£10m annual average over the previous 3 reporting years).
- Managing conflicts of interest.
- Principal dealing permitted subject to conflict mitigation measures.
|
| Intermediaries |
- Retail client orders must be executed on UK authorised venues.
- Functional separation between proprietary trading and client order execution.
- Payment for order flow prohibited.
- Specific record keeping and client reporting requirements.
- High level expectations for settlement arrangements.
|
| CATPs and intermediaries |
- Pre and post trade transparency with a view to aiding price formation.
- Ensure adequate transaction recording and client reporting.
- Payment for order flow prohibited.
|
| Lending and borrowing |
- Retail access permitted with safeguards.
- Prohibition on firms using proprietary tokens in L&B services.
- Express prior consent required from retail clients on key terms.
- All lending to retail clients must be over-collateralised.
- Negative balance protection ensuring clients cannot lose more than pledged collateral.
- Limits on automatic collateral top-ups (maximum 50% of initial collateral).
|
| Staking |
- Clear information provision and express prior consent on key terms each time cryptoassets are staked.
- Comprehensive record keeping of staking activities.
- Operational resilience, prudential and safeguarding requirements apply.
|
| Decentralised finance |
- Rules and guidance apply to DeFi services with identifiable controlling persons carrying out regulated activities.
- Truly decentralised protocols with no business entity remain out of scope.
- Further guidance on decentralisation metrics to be consulted on later.
|
This consultation proposes rules for admitting cryptoassets to trading on UK CATPs and the disclosure regime (A&D regime), aimed at ensuring investors have access to comprehensive and comparable information to make informed investment decisions, and a market abuse regime for cryptoassets (MARC) to prohibit insider dealing, unlawful disclosure of inside information and market manipulation in relation to relevant cryptoassets.
These proposals follow the FCA's discussion paper DP24/4 on regulating cryptoassets admissions, disclosures and market abuse, which sought industry feedback on these topics in 2024.
A&D regime
The A&D regime replaces Consumer Duty rules for public offers and admissions to trading of qualifying cryptoassets for retail investors, although the Consumer Duty still applies to UK-issued qualifying stablecoins.
The FCA requires issuers or offerors to produce qualifying cryptoasset disclosure documents (QCDDs) before a cryptoasset can be admitted to trading on a UK CATP, except for UK-issued qualifying stablecoins which are subject to a separate issuer-focused disclosure regime initially consulted on in CP25/14.
The QCDDs must contain material information to enable investors to make informed decisions, including details on governance arrangements, technology, risks, conflicts of interest and ownership structures. Each QCDD must include a two-page "Summary of Key Information" highlighting the main risks, features and conflicts of interest in plain language.
If there are significant new factors or material mistakes before admission, a supplementary disclosure document (SDD) must be published, with investors having withdrawal rights exercisable within 2 working days, and CATPs must file QCDDs and SDDs with the FCA's national storage mechanism.
The FCA also outlines that CATPs must establish admission criteria to assess whether admitting a cryptoasset would be likely to be detrimental to retail investors, and conduct due diligence to verify the accuracy of disclosures and manage risks.
MARC
| MARC requirement |
Details |
| Scope |
Applies to issuers, offerors, CATPs and intermediaries with permissions in relation to relevant cryptoassets. Requirements vary according to the type of firm. |
| Systems and controls |
CATPs and intermediaries must establish and maintain effective systems and controls to prevent, detect and disrupt market abuse, including monitoring trading activity and suspicious transactions. |
| Information sharing |
Large CATPs (≥£10m annual revenue) must monitor on-chain activity and share information with other large CATPs under a secure framework to detect cross-platform market abuse. |
| Insider lists |
Issuers, offerors and CATPs must maintain insider lists identifying persons with access to inside information. |
| Disclosure of inside information |
Inside information must be disclosed promptly on websites and actively disseminated via appropriate channels, then filed with the FCA's central repository. Delays of disclosures are permitted under certain circumstances. |
| Legitimate market practices |
The FCA defines legitimate market practices, such as coin burning and crypto-stabilisation, with criteria that ensure transparency and market integrity safeguards. |
This proposal outlines comprehensive prudential requirements for cryptoasset firms, building on the earlier consultation paper CP25/15 (which we discussed in our article here), covering own funds requirements, overall risk assessment obligations and public disclosure of prudential information. As described in CP25/15, the overall prudential framework for cryptoasset firms is set out across two separate sourcebooks, COREPRU and CRYPTOPRU. The FCA intends to develop and apply COREPRU only to firms carrying on regulated cryptoasset activities initially and then will consult on moving other types of regulated firms into COREPRU in the future.
Own funds requirements
The Own Funds Requirement, introduced in CP25/15, is the highest of three limbs: the permanent minimum requirement (PMR), the fixed overhead requirement and K-factor requirement (KFR).
The consultation paper discusses the PMR and KFR for the various activities specified in the Regulations not covered in the earlier consultation paper, namely operating a qualifying CATP, staking, arranging deals, dealing as agent and dealing as principal in qualifying cryptoassets.
PMR sets fixed minimum own funds amounts based on the firm's activities, ranging from £75,000 for dealing as agent and arranging deals, to £150,000 for operating CATPs and staking services, and £750,000 for dealing as principal.
K-factors capture operational and exposure-based risks. CP25/42 introduces the following six K-factors (indicated in bold below), in addition to the two K-factors introduced in CP25/15.
| K-factor |
What CP25/42 proposes |
| K-CCO (client cryptoasset orders) |
0.1% of average cryptoasset orders, covering orders handled when carrying on reception and transmission of cryptoasset orders and execution of orders on behalf of clients, with orders executed in the firm's own name excluded. |
| K-CTF (cryptoasset trading flow) |
0.1% of average cryptoasset orders, covering cryptoasset orders that a firm enters in its own name. |
| K-CCS (clients' cryptoassets staked) |
0.04% of average clients’ cryptoassets staked for firms arranging qualifying cryptoasset staking, with cryptoassets already included in K-QCS excluded from the measurement to ensure consistency. |
| K-QCS (qualifying cryptoasset safeguarding) |
CP25/15 proposed a K-QCS requirement equal to 0.04% of average qualifying cryptoassets safeguarded, using a 9-month rolling average excluding the most recent 3 months, with monthly recalculation and modified calculations for new firms. CP25/42 carries this forward in CRYPTOPRU 4.5 and expands the scope to include relevant specified investment cryptoassets in line with the Regulations. Where a firm is subject to both CRYPTOPRU and MIFIDPRU, K-ASA (the MIFIDPRU equivalent for assets safeguarded and administered) is disapplied to avoid double-counting, with K-QCS taking precedence for relevant specified investment cryptoassets. |
| K-SII (stablecoin issuance) |
CP25/15 proposed a K-SII requirement equal to 2% of average qualifying stablecoin in issuance, calculated using a 9-month rolling average excluding the most recent 3 months, with monthly recalculation and modified calculations for new firms with less than 9 months of data. CP25/42 carries this forward in CRYPTOPRU 4.4. |
| K-CCD (cryptoasset counterparty default) |
1.2 × exposure value × risk factor, with risk factors of 1.6% for central governments/banks/regulated firms, 8% for other counterparties, and 83.33% for retail clients, with exposure value calculated as the maximum of zero or replacement cost minus collateral, adjusted for volatility. |
| K-CON (concentration risk) |
For firms entering into trading book transactions involving qualifying cryptoassets, an own funds requirement is calculated where exposures exceed the concentration risk soft limit (generally set at 25% of own funds, or higher for exposures to regulated firms), with multiplying factors applied based on duration and size of excess. |
| K-NCP (net cryptoasset position) |
Position risk adjustments of 40% for category A cryptoassets (such as Bitcoin and Ether) and 100% for category B cryptoassets (higher risk assets), with category A cryptoassets required to meet seven conditions including trading on a UK CATP. |
Overall risk assessment and liquidity
Firms must establish systems and controls to identify, monitor and mitigate risks that could cause material harm, including performing business model assessments, stress testing, recovery and wind-down planning, and assessing the adequacy of own funds and liquidity. Senior management has clear governance responsibility for the overall risk assessment.
Firms must maintain a basic liquid assets requirement based on fixed overheads and guarantees, with qualifying stablecoin issuers subject to an additional issuer liquid asset requirement assessing backing asset pools. Firms may use core liquid assets (with applicable haircuts) and non-core liquid assets (subject to stringent criteria), and must assess liquidity needs over a 90-day rolling period and for wind-down scenarios.
Public prudential disclosures
Firms must publish annual disclosures of their risk management summary, own funds composition, capital requirements, group exposures and any significant changes, in an accessible, clear and consistent format, typically on their websites.
Timeline and next steps
The FCA has requested feedback on each consultation paper by 12 February 2026, with final rules to be published in policy statements during 2026 (in accordance with its crypto roadmap) and the new regime coming into force from 25 October 2027.
Firms operating in or planning to enter the UK cryptoasset market should:
- review the consultation papers and assess their impact on business models and operations
- prepare for authorisation applications so that they are ready to submit them when the FCA's application period begins, which is expected to be in September 2026
- begin developing compliance frameworks addressing the proposed conduct, prudential and disclosure requirements
- monitor the FCA's forthcoming consultations on matters such as (but not limited to) settlement arrangements, location policy for international firms, Consumer Duty and conduct requirements, financial promotions, regulatory reporting, safeguarding requirements for staking, and DeFi guidance, as well as the policy statements finalising the current consultations expected in 2026.
Conclusion
The FCA's three consultations represent a significant step in the development of a comprehensive framework for cryptoasset regulation in the UK, which is by no means a straightforward exercise. As FCA Chief Executive Nikhil Rathi recently acknowledged when giving evidence to the Treasury Select Committee, the regime involves important trade-offs. Opening the UK market to global crypto firms brings opportunities but also heightened risks around financial crime and market abuse. The breadth and depth of these consultations reflect the complexity of regulating this rapidly evolving sector.
Since the proposed timeline is tight, with final rules expected in 2026 ahead of go-live in 2027, firms will need to be ready to invest in building compliance capabilities, restructuring business models where necessary, and preparing authorisation applications. Those that engage proactively with the consultation process and begin implementation planning early will be best positioned to thrive in the UK's regulated cryptoasset market.
Help is at hand
Please do not hesitate to get in touch if you have any questions on the proposed regulatory regime for cryptoassets.
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