The UK is moving towards a comprehensive regulatory framework for crypto assets, with the Financial Conduct Authority (FCA) establishing a regime that would subject a wide range of digital asset services to formal oversight for the first time. The proposal, now up for public comment, signals a more structured approach to crypto regulation, even as comparable efforts in the United States remain stalled in Congress.
Under the FCA Overviewcore crypto activities including trading, custody, issuance and staking would fall within the regulatory scope, marking a shift from the UK’s current patchwork approach focused primarily on financial promotions and anti-money laundering compliance. The regulator expects businesses to start applying for authorization as early as September 2026, with the full regime expected to come into force by October 2027.
The consultation aims to help businesses determine whether their business models fit within policymakers’ transition to a more comprehensive system governing crypto-asset services. This clarity is particularly important for global businesses serving UK customers, including US operators who will need to reassess their structures and compliance obligations ahead of the authorization window.
A central element of the FCA’s proposal is that it relies on an “activity-based scope” rather than licensing entire businesses. Like Yuriy Brisov, partner at Digital & Analogue Partners says Decrypt“It is written around intermediated models: issuers, custodians, venues, staking providers, rather than around protocol-level functions,” adding that the approach is “more flexible than an entity-based license but still aligns with today’s CeFi taxonomy.”
This design choice reflects an effort to balance regulatory clarity and flexibility in a rapidly changing market. However, this also leaves important questions open, particularly regarding decentralized finance. Brisov noted that the current framework “deliberately does not yet describe the part of the market most likely to define the next cycle,” warning that companies developing non-custodial or composable systems should expect “ongoing classification debates.” He added that “it is also unclear – and (European Union) regulation faces a similar problem – how DeFi protocols should work in the early stages,” arguing that “the only real DeFi project on Earth as of today is Bitcoin.”
Read more: SEC and CFTC release first-ever crypto classification framework
The FCA’s approach also draws heavily on traditional financial regulatory tools. According to Brisov, the framework “largely reorients the post-2008 toolbox – authorization, prudential capital, rules of conduct, monitoring of market abuse”, although it “does not yet address the risks that emerge from the technology itself”. The regime prioritizes risks such as conservation integrity, financial crime and market abuse, while leaving more complex issues – including cross-protocol contagion and offshore spillovers – less clearly addressed.
Other rules are awaited. The FCA said it would launch further consultations later this year on guidance on decentralized finance and operational resilience requirements for firms using distributed ledger technology, alongside updates to its financial crime guidance. Previous consultations have already focused on consumer protection, standards of conduct and supervisory obligations for crypto companies operating in the UK.
The current consultation period runs until June 3, with final rules expected this summer and additional guidance to follow in the fall. The initiative builds on legislative changes passed in February that formally brought crypto activities within the UK’s regulatory jurisdiction, as part of a wider strategy to create what regulators describe as an “open, sustainable and competitive” market.
The UK’s forward movement contrasts with that of the United States, where efforts to enact comprehensive legislation on crypto market structure have repeatedly failed due to political divisions and jurisdictional disputes between federal agencies. While U.S. regulators have continued to act by enforcing rules and providing incremental guidance, the lack of a unified statutory framework has left companies stuck in a fragmented regulatory landscape.
In comparison, the FCA consultation represents a clearer path towards comprehensive crypto oversight, although it still leaves key questions unanswered, particularly regarding decentralized technologies and systemic risk.
