The FCA has set out its five-year strategy for 2025-30, setting out a vision to deepen trust, rebalance risk, support growth and improve lives.
The FCA published a discussion paper (DP) on regulating crypto activities on 2 May 2025. The DP sets out the FCA’s proposed regulatory framework for cryptoasset trading platforms, intermediaries, lending and borrowing, restructuring the use of credit, staking and decentralised finance (DeFi).
The DP follows HM Treasury's draft Statutory Instrument (SI) and policy note on 29 April 2025. The SI amends the Regulated Activities Order (RAO), bringing specific cryptoasset-related activities within the FCA's regulatory perimeter.
In this article
What does this mean?
The FCA proposes a regulatory regime for firms operating cryptoasset trading platforms (CATPs), requiring UK authorisation for those serving UK clients. The regime is informed by existing trading venue rules and aims to address risks including poor execution, market abuse, conflicts of interest, and system failures.
The FCA emphasises non-discretionary trading, meaning CATPs must apply consistent, rules-based execution without judgement or preference. Platforms must manage or eliminate conflicts, particularly where they engage in principal trading or offer affiliated services like issuance or custody. The FCA discourages CATPs from engaging in principal trading, on or off-platform, due to risks to market integrity and consumer outcomes. It is considering legal or operational separation of affiliated trading entities as a possible means of mitigation.
Direct retail access is permitted but brings regulatory obligations. CATPs must take responsibility for ensuring fair access, monitoring client behaviour, and enforcing rules. Additional obligations apply where algorithmic trading or market-making is present, including transparency and contractual oversight.
On location and structure, the FCA proposes that firms serving UK retail clients should have a UK legal presence, ideally through a combination of a UK branch and subsidiary. This supports effective supervision, ensures the firm meets FCA standards, and enables access to global liquidity while mitigating risks from offshore-only models. The Overseas Persons Exclusion will not apply to CATPs.
CATPs will also face pre- and post-trade transparency obligations and be expected to retain transaction data. Record-keeping requirements are intended to apply across both on-chain and off-chain environments, with consideration given to privacy and duplication concerns.
The FCA proposes to regulate cryptoasset intermediaries, including brokers and dealers, under a framework aligned with traditional financial markets. UK authorisation will be required for firms serving UK clients. The regime is expected to cover conduct, consumer protection, prudential standards, operational resilience, and market integrity. This includes rules around disclosure, suitability, safeguarding client assets, and managing conflicts of interest. Where intermediaries provide custody or execution services, they may also fall under other parts of the proposed regime (e.g. CATP or custody rules).
Particular attention is given to vertically integrated firms offering multiple services, where conflicts of interest may arise and consumer protections may be undermined. The FCA is considering how to apply the Consumer Duty.
The FCA proposes to bring cryptoasset lending and borrowing within the regulatory perimeter, requiring UK authorisation for firms offering such services to UK clients. Key risks identified by the FCA include lack of transparency, counterparty defaults, and misuse of client assets. The regulator’s proposals focus on clear disclosures, risk warnings, segregation of assets, and limits on rehypothecation. The FCA is also considering prudential and conduct requirements, and application of the Consumer Duty.
The FCA is considering restricting or banning the use of credit to purchase cryptoassets, particularly by retail consumers. This reflects concerns over speculative behaviour, over-indebtedness, and poor consumer outcomes. The proposals build on existing rules which already prohibit credit card use for certain high-risk investments. The FCA is assessing whether broader credit restrictions are justified, including on personal loans and other forms of borrowing. It is also seeking views on how buy-now-pay-later (BNPL) and peer-to-peer lending intersect with cryptoasset purchases.
The FCA is exploring whether and how cryptoasset staking should be regulated under the new regime. It acknowledges staking’s role in proof-of-stake blockchains, but flags risks around consumer understanding, asset control, and potential misrepresentation of risk and return. Key concerns include whether staking arrangements resemble regulated activities such as collective investment schemes or custody. The FCA is considering authorisation requirements for staking service providers and is seeking views on how to apply conduct, prudential, and safeguarding obligations. It aims to balance innovation in staking models with the need to protect consumers and ensure firms act responsibly.
The FCA explores regulating DeFi activities where sufficient control or influence exists, focusing on accountability, governance, and consumer risks. It recognises DeFi’s structural challenges but proposes applying existing principles where appropriate, particularly to front-end operators, developers, or governance participants engaged in regulated cryptoasset activities targeting UK users.
What do firms need to do?
Map your trading platform’s activities against the proposed regulatory categories to identify future permissions and structural implications required.
Stress test governance and control frameworks against potential restrictions on proprietary trading, algorithmic strategies and market making.
Engage with the FCA’s on this and future consultations, especially on proposals for group structures, retail access and operational separation.
Firms operating or planning to operate a cryptoasset trading platform should assess whether their current or proposed activities will fall within the FCA’s new regulatory perimeter. Those serving UK clients, particularly retail, should prepare for UK authorisation and begin considering the operational, structural and governance implications.
Firms should review platform models, especially if they involve proprietary trading, matched principal trading, or vertical integration with custody, issuance or market-making functions. Firms should also evaluate whether current arrangements would meet the FCA’s expectations on non-discretionary execution, transparency and conflict management.
International firms should examine whether they will need to establish a UK legal presence and how group structures, such as subsidiaries and branches, can support compliance and supervision.
Given the FCA’s emphasis on fair access and robust controls, platforms should also assess how they monitor algorithmic trading, manage retail participation and maintain orderly markets.
“This paper signals a fundamental reshaping of crypto trading in the UK. Platforms will need to rethink their execution models, legal structures and how they handle conflicts of interest. This is the start of a new market standard, and engaging proactively, while protecting core value propositions, will unlock competitive advantage.”
James Moseley
Partner, PwC UK Digital Assets Lead
Next steps
The DP closes on 13 June 2025 and will be followed by regulatory consultations throughout 2025 and 2026, as per the FCA’s crypto roadmap.
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