The UK Financial Conduct Authority (FCA) has entered the final phase of its crypto regulation journey by publishing Consultation Paper CP26/4. This document outlines how the Consumer Duty and core conduct standards will apply to cryptoasset firms, marking a shift from conceptual oversight to enforceable operational rules.
The FCA is gathering feedback on the proposals until March 12, 2026. A key component is the application of the Consumer Duty, which requires firms to act in good faith, avoid foreseeable harm, and support customers in achieving their financial objectives. The regulator emphasized that these rules are meant to set industry standards and create a "cleaner market," but do not eliminate the inherent investment risks of cryptoassets.
The proposed framework covers the full operating stack of crypto firms. It mandates transparent pricing, clear disclosures, and accessible customer support under Conduct of Business (COBS) rules. Furthermore, crypto activities would fall under the Financial Ombudsman Service (FOS), providing consumers with a formal dispute resolution path. The FCA confirmed it will not ban credit card purchases of cryptoassets, a point closely watched by the industry.
For client asset safeguarding, the proposal requires client crypto to be held in trust-based structures, with firms allowed to maintain limited operational "floats" of up to 1% strictly for settlement. The FCA also seeks to apply the Certification Regime and Senior Managers Regime to crypto firms, setting standards for staff skills and knowledge.
The regulatory timeline is clearly defined. The application gateway for crypto permissions will open in September 2026, with final policy statements expected in late 2026. The full regime becomes mandatory on October 25, 2027. By this deadline, all crypto service providers operating in the UK, including those already registered under anti-money laundering (MLR) rules, must be fully authorized. The FCA recently awarded MLR registration to Ripple, the issuer of XRP.
However, the FCA made a significant clarification: cryptoassets will not be covered by the Financial Services Compensation Scheme (FSCS). This means customers of a failed regulated crypto firm should not expect compensation for investment losses, a protection available in traditional finance. The regulator noted potential inconsistencies, as claims about traditional shares held in custody are covered by the FSCS, but claims about tokenized shares on blockchains will not be.
