Crypto Companies In The UK May Escape Customer Protection Regulations, FCA Suggests

As the push for pro-crypto innovation intensifies, particularly in light of the United States’ regulatory advancements under President Donald Trump, the UK’s Financial Conduct Authority (FCA) is considering new proposals that may exempt crypto firms from certain integrity rules designed to protect consumers. Key Principles For UK Crypto Trading Platforms The FCA has recently published a consultation outlining minimum standards that could potentially waive four crucial principles for crypto asset trading platforms. These principles mandate that firms operate with integrity, exercise skill and diligence, prioritize customer interests, and ensure that the advice and discretionary decisions provided to customers are appropriate. David Geale, the FCA’s Executive Director of Payments and Digital Finance, emphasized the regulator’s intention to cultivate a sustainable and competitive crypto sector. He stated, “We want to balance innovation, market integrity, and trust.” While acknowledging that these proposals will not eliminate the potential risks associated with cryptocurrency investments, Geale noted they would help firms establish common standards, offering consumers clearer expectations. In light of recent events, such as the $1.5 billion hack of Dubai-based cryptocurrency exchange Bybit in February, the FCA is also advocating for stricter operational risk management protocols. Talks To Shape Future Regulatory Framework The FCA is also seeking feedback on whether the consumer duty—which mandates that firms prioritize their customers—should apply to digital asset firms. Additionally, discussions are underway regarding customer access to the Financial Ombudsman Service for potential compensation. Charles Kerrigan, a partner and artificial intelligence (AI) specialist at law firm CMS, suggested that it is likely the consumer duty will apply once crypto assets are integrated into the broader regulatory framework. Interestingly, digital asset adoption among the British public is on the rise, with recent government statistics indicating that approximately 12% of adults own or have owned currencies such as Bitcoin (BTC) or Ethereum (ETH), a significant increase from just 4% in 2021. The FCA’s proposals come after the UK signaled its intention to collaborate with the US on crypto. Recent discussions between UK Chancellor Rachel Reeves and US Treasury Secretary Scott Bessent have reportedly set the stage for a significant agreement aimed at enhancing cooperation in the cryptocurrency sector. The meeting included representatives from major digital asset companies like Coinbase (COIN), Circle (CRCL), and Ripple, as well as US banking institutions such as Citigroup and Bank of America. The urgency of these discussions was prompted by a letter from crypto industry groups urging the UK government to prioritize digital assets and blockchain in any new trade arrangements with the US. Featured image from DALL-E, chart from TradingView.com