The Financial Conduct Authority (FCA) has announced sweeping new regulations for crypto firms operating in the UK, requiring them to demonstrate resilience to market shocks and hold capital against risky assets. The rules, set to take effect in October 2026, mark a significant increase in oversight for an industry that has faced minimal regulation despite growing popularity driven by social media influencers and a push for legitimacy under US President Donald Trump.
Comprehensive regulatory framework
David Geale, the FCA’s executive director in charge of payments and digital finance, stated: “For the first time, we’ve got a comprehensive regulatory framework for crypto in the UK, one that covers how firms trade, how they hold assets, serve consumers and manage risk.” He emphasised that the package applies the same core principles used across financial services, aiming for consistent regulatory outcomes where similar risks exist.
Crypto firms will be required to meet capital requirements, building a financial cushion to absorb losses from risky assets on their balance sheets. They must also conduct annual stress tests to prove they can withstand major market shocks and economic strain. However, firms will have the power to determine their own risk levels, which will dictate the amount of capital they need to hold. Unlike major UK banks that follow specific scenarios set by the Bank of England, crypto companies will design their own stress tests based on internal risk assessments and submit them to the FCA each year.
Industry pushback and consumer risks
The FCA has reduced the capital required for some crypto assets, such as stablecoins pegged to fiat currency, following pushback from the industry. Despite the new rules, consumer risks remain. The regulator warns that investors can still lose all their money if they choose to invest in crypto. Geale noted: “Consumers have been exposed to real harm from unregulated activity and the regime that we’re putting in place, we believe, addresses that directly.”
The regulations aim to curb bad behaviour and questionable business practices that have left many out of pocket. Geale added: “This is really about giving crypto a solid foundation from which to build. Firms have been asking us for regulatory clarity and we think we’ve delivered it.”
Expert warnings
Dan Coatsworth, head of markets at investment platform AJ Bell, cautioned that consumers should remain vigilant. “Crypto has grown in popularity as a way for people to spread their wealth, but it has also become associated with get-rich-quick schemes and worryingly portrayed on social media as an easy way to make money,” he said. “There is a danger that people aren’t thinking about the safety of their money when looking to gain exposure. Regulation provides stronger consumer protection and helps to reduce scams, misleading promotions and losses from poor practices. It can reduce risk but doesn’t remove it completely.”
