In April 2025, the Treasury published a draft statutory instrument that would create new regulated activities for cryptoasset providers. The latest consultation on the topic sets out plans to regulate these activities under existing rules for traditional finance.

Once enacted, the following activities will become regulated in the UK:

• Issuing stablecoins in the United Kingdom

• Safeguarding and custody of cryptoassets

• Operating a cryptoasset trading platform

• Dealing in, arranging, and lending/borrowing cryptoassets

• Cryptoasset staking

The Financial Conduct Authority (FCA) has released several papers outlining its regulatory approach to cryptoasset activities. The latest, CP25/25, published in September 2025 proposes applying the existing FCA Handbook to cryptoasset firms.

The central theme from this series of papers has been that the regulator’s proposed approach will be to use the existing regulations for traditional finance, and apply these to cryptoasset firms on an equivalence basis. This approach will mean cryptoasset firms will need to be fully authorised and supervised by the FCA, but also that traditional finance firms will be able to expand their current permissions to cover crypto-related activities without any fundamental changes to their business practices.

For example, cryptoasset custodians would face capital requirements using the same methodology as traditional investment firms, based on the highest of three components:

1. Permanent minimum

2. Fixed overhead

3. Activity-based ‘K-factors’

This offers both benefits and drawbacks for providers. The use of the same methodology as traditional investment firms makes it easier for those existing firms to add on the cryptoasset permissions to their existing ones. For new entrants it leverages the existing trust and credibility in the financial system whilst promoting regulatory consistency. However, it may impose high capitalisation requirements which could create barriers for smaller players. The FCA has seemed to be open to feedback, having revised its initial proposal that required ‘real time’ reconciliation of clients’ cryptoassets. Instead, it now calls for daily reconciliation, aligning this requirement with the existing rules for traditional finance custodians in CASS 6.

The latest consultation paper, CP25/25, whilst broadly proposing that most sections of the FCA’s existing handbook are applied to cryptoasset firms, includes a rounded discussion on the potential benefits and issues of two key variances to the current approach. The discussion revolves around whether the FCA should apply the existing Consumer Duty rules to these firms, or whether it should be disapplied and a new set of sector-specific rules created. Additionally, they are consulting on whether customers of cryptoasset firms should have access to the Financial Ombudsman.

The FCA is attempting a balancing act, ensuring the new regime focuses on strong consumer protection and operational resilience, whilst keeping alignment with evolving regulatory regimes in the US and EU, and providing a framework for an evolving industry to prosper. A forthcoming paper titled “Trading platforms, intermediation, lending, and staking” (expected Q4 2025/Q1 2026) may propose more tailored regulations to address crypto-specific risks. This follows the FCA’s concerns surrounding the vertical integration of several platforms and may review proposals for the segregation of custody-like activities from other activities, such as the use of settlement wallets.

Until the new regime goes live, any cryptoasset firm operating in the UK must still register with the FCA and operate under their supervision for anti-money laundering, and comply with the restrictions around financial promotions to UK-based consumers.

At Buzzacott we have extensive experience with traditional finance, from investment platforms to brokerage services as well as certain activities in the cryptoasset space. We welcome the FCA’s approach to regulating the industry and hope it will achieve the right balance between protecting the consumers whilst still allowing the crypto firms to operate effectively in this rapidly evolving market.