The UK Financial Conduct Authority (FCA) has published its landmark cryptocurrency regulatory framework, marking the end of its cryptocurrency roadmap to bring digital assets under the regulator’s remit.
According to a Tuesday press release shared with Cointelegraph, significant modern elements include mandatory licensing for cryptocurrency companies, capital stress testing requirements, improved rules for market manipulation and insider trading, and simplified capital requirement standards for stablecoin issuers.
The licensing window for cryptocurrency companies will be open from September to February 28, 2027, before the system goes into effect on October 25, 2027.
The modern framework means crypto firms in the UK will be held to “similar standards” to other financial services providers in the country, wrote David Geale, executive director of payments and digital finance at the FCA, adding:
“We have created a framework that does not force companies to choose between regulatory certainty and space to innovate – this system means they can have both in a stable, competitive home where they can build and grow.”
Cryptocurrency firms, including trading platforms, custodians, stablecoin issuers, staking firms and other intermediaries, must obtain FCA authorization to operate in the UK under the modern framework.
The framework comes almost a month after the regulator ended its consultation window on June 3 on guidelines for the country’s future crypto regime.
FCA crypto regime overview, next steps and savings regulations. Source: FCA
AML-authorized crypto companies need modern licenses in the UK
Crypto companies with an existing authorization under money laundering regulations will not have their licenses automatically converted and will need to obtain a modern authorization.
Some companies already operating in the UK can continue certain activities for a circumscribed period by applying for authorization under the framework’s transitional ‘savings provisions’.
The FCA said pre-application support meetings for companies will be available from next month.
The regulator will present its policy statements in a webinar on July 17. It will also release another policy statement in September to establish how regulatory scope applies to cryptocurrency activities.
Related: Aave Labs’ Push obtains UK FCA cryptocurrency registration
FCA simplifies stablecoin capital standards and promises tailored DeFi guidelines
The FCA has maintained the basic stablecoin framework but has made minor changes, including simplifying the requirement for the composition of underlying assets by ceasing to require estimated maturity projections, adding requirements for statutory custody of reserves and removing unallocated hedge fund accounts.
The guidelines will also require issuers to provide users with certain withdrawal rights, allow 5% of excess assets to be held in a pool of underlying assets, and allow circumscribed intra-group holding subject to collateral.
The FCA noted that this establishes an “underlying regime for the issuance of stablecoins” and added that it will consult with the Bank of England later this year on how the agency’s rules will apply to stablecoin issuers deemed systemic by HM Treasury.
New guidelines for the issuance of stablecoins. Source: FCA
Later this year, the FCA will also host a separate consultation on decentralized finance (DeFi) guidance and operational resilience guidance for companies using distributed ledger technology (DLT).
It also plans to consult on updates to the Financial Crimes Guide regarding crypto asset companies.
“We will continue to work on DeFi,” said Matthew Long, director of payments and digital assets at the FCA, adding that we are looking for a case-by-case approach as “true DeFi” without “any identifiable person undertaking the activity” will not fall within the scope of the regulation.
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