UK Finalizes Crypto Regulatory Framework

The UK's Financial Conduct Authority (FCA) has published its long-awaited crypto regulatory framework, completing its roadmap to bring digital assets under the regulator’s oversight.

The new rules introduce mandatory licensing for crypto firms, capital stress-testing requirements, enhanced measures against market manipulation and insider trading, and simplified capital standards for stablecoin issuers, according to a Tuesday announcement. The licensing application window will open in September and remain available until Feb. 28, 2027, before the new regulatory regime officially comes into force on Oct. 25, 2027.

According to the FCA, the framework will hold crypto businesses to standards similar to those applied to traditional financial services providers in the UK. “We’ve created a framework that doesn’t force firms to choose between regulatory certainty and room to innovate – this regime means they can have both in a stable, competitive home to build and grow,” wrote David Geale, executive director of payments and digital finance at the FCA.

Under the framework, cryptocurrency exchanges, custodians, stablecoin issuers, staking providers and other digital asset intermediaries will all be required to obtain FCA authorization before operating in the UK. The announcement comes nearly a month after the regulator closed its consultation period on June 3 and represents a major step toward transitioning the UK from an enforcement-led approach to a comprehensive financial services regime for crypto.

Edwin Mata, lawyer and CEO of tokenization platform Brickken, told Cointelegraph that the framework illustrates the FCA’s efforts to make crypto firms operate more like regulated financial institutions.

Existing crypto firms must apply for new licenses

Companies currently registered under the UK's anti-money laundering (AML) regulations will not automatically receive authorization under the new framework and must apply for a new license. However, certain firms already operating in the UK will be able to continue specified activities for a limited period under transitional "savings provisions" while seeking authorization.

The FCA also announced that pre-application support meetings for crypto firms will begin next month.

In addition, the regulator will host a webinar on July 17 outlining the new policy framework before publishing another policy statement in September that will further clarify how the regulatory perimeter applies to cryptoasset activities.

Stablecoin rules simplified as DeFi guidance continues

Alongside the broader framework, the FCA has updated its approach to stablecoin regulation by simplifying several reserve and capital requirements. The regulator has removed the requirement for estimated redemption forecasts, introduced statutory trust protections over reserve assets, removed unallocated backing fund accounts, and will require issuers to provide specific withdrawal rights to users. Stablecoin issuers will also be allowed to hold a 5% excess in their backing asset pool and use limited intragroup custody arrangements, subject to safeguards.

The FCA said these changes establish a baseline framework for stablecoin issuance and confirmed it will consult with the Bank of England later this year on how the rules will apply to stablecoins designated as systemic by HM Treasury. Katie Harries, Coinbase's Head of Policy for Europe, welcomed the final framework, saying it preserves access to global liquidity and introduces an innovative licensing structure. However, she also highlighted two remaining concerns.

“While the FCA has made welcome changes to its prudential framework, it is an open question as to whether these changes have gone far enough to ensure the cost of doing business in the UK is not materially higher vis-a-vis other jurisdictions.” Harries also pointed to the regulator's future approach to decentralized finance (DeFi), arguing that earlier proposals amounted to a “de facto ban on centralised platforms providing access to DeFi applications.”

Later this year, the FCA plans to launch separate consultations covering DeFi guidance, operational resilience requirements for firms using distributed ledger technology (DLT), and updates to its Financial Crime Guide for cryptoasset businesses. “We’re going to continue to work on DeFi,” said Matthew Long, director of payments and digital assets at the FCA, adding that the regulator intends to assess projects on a case-by-case basis because “true DeFi” with “no identifiable person undertaking the activity” would fall outside the scope of the regulation.

Sources:

https://www.ft.com/content/c2ace628-7bd9-4f3b-b835-970d6dd930bb?syn-25a6b1a6=1

https://cointelegraph.com/news/uk-crypto-rules-2027-fca-authorization-deadline