Last December, the Financial Conduct Authority (FCA) published three extensive consultation papers, each tackling a proposal for regulating cryptoasset activities in the UK[1]. Collectively assigned the moniker “crypto consultation trilogy”[2], they are a part of the FCA’s plan for integration of digital assets into the UK’s mainstream financial system. These set of consultation papers reflect a basal shift from cryptoasset limbo to a clear roadmap for assimilation. While standing on the intersection of innovation and consumer protection, they also raise trade-offs that demand a more sober evaluation.
Regulating Not Just Crypto Assets [3]
- CP25/40 marked the first consultation paper that focuses on regulating these assets by economic function, with activities under scope including operating trading platforms, crypto lending and borrowing, among others. It also reflected the expanded regulatory remind originally created by the Financial Services and Markets Act 2000 (Cryptoassets) Regulation 2025.
- CP25/41 addresses a long-standing weakness of crypto market integrity, by introducing an admissions and disclosure regime as well as a tailored market abuse framework. Standardised disclosure documents and reporting of abusive behaviours such as insider trading and manipulation form part of the aim to improve quality and reliability of information available to investors.
- CF25/42 highlights financial resilience by proposing capital and liquidity requirements and risk-based metrics set up to reflect market volatility and crypto firms’ exposure. It covers firms undertaking activities such as trading platforms, staking, arranging deals, etc.
While the FCA attempts to prevent a repeat of the previously characterised crypto downturns, they stop short of sweeping all protocols into scope. For example, fully autonomous DeFi systems without identifiable operators remain outside regulation as proposed. While the new UK authorisation requirements may strengthen consumer protection, they also raise new barriers to entry by favouring well capitalised, perhaps more established, firms over smaller enterprises and startups. They impose costs and compliance requirements that may have a hand in encouraging token launches outside the UK.
These papers are currently open for feedback until February 12th, 2026, and are central to the FCA’s “Crypto Roadmap”, a staggered plan to phase in crypto regulation. The launch of these consultation papers coincides with recent research that shows a decline in UK crypto ownership, throwing into sharp light the prevalent consumer scepticism about risk appetite and volatility.[4] The proportion of UK adults holding cryptocurrencies declined from 12% in 2024 to around 8% in 2025.[5] The challenge for the UK will now be to ensure that the regulation will support sustainable innovation rather than unintentionally driving the activity offshore.
Key Considerations for Appointed Representatives and Regulated Firms
Under this newly proposed crypto regime, the traditional AR model is effectively sidelined where core cryptoasset activities are concerned. Introduction of crypto-specific regulated activities are intended to be carried only by firms directly authorised by the FCA with explicit permissions. This is reflection of the FCA’s concern that AR arrangements may dilute the role of accountability in high-risk sectors and may not be well suited for operational complexity and consumer risks that are usually associated with crypto assets.
Major concerns of a UK-regulated firm would be the need for new permissions, and whether there is a need to change, separate and/or stop parts of their business to remain authorised. There is also concern over how long the approval process for these new permissions could take, if any conditions are imposed, a concern that is all the more acute for firms relying on AML registration only, overseas authorisation, and group entities or outsourcing models. The FCA has signalled that cryptoasset activities will fall within existing accountability frameworks, raising issues related to personal liability, enforcement, and exposure among other things, rendering the Senior Managers and Certification Regime as another significant area of attention.[6]
Taking into consideration the FCA’s stated intention to subject crypto firms to heightened supervision, this pushes forward the view that the regime marks a shift from light-touch supervision to intensive regulatory oversight and engagement. It also cements the need for regulatory certainty and consumer protection over structure flexibility.
[1] FCA seeks feedback on proposals for UK crypto rules | FCA
[2] Decoding the FCA’s crypto consultation trilogy: what firms need to know
[3] FCA seeks feedback on proposals for UK crypto rules | FCA
[4] British regulator kicks off consultation on new crypto rules | Reuters
[5] Research Note: Cryptoassets consumer research 2025 (wave 6)
[6] Financial Conduct Authority, Senior Managers and Certification Regime: Overall framework; see also FCA statements on application of SMCR to cryptoasset firms.
