On Wednesday 30th September, the Financial Conduct Authority (FCA) opened the cryptoasset licence application gateway which represents a significant milestone prior to the establishment of the UK's new cryptoasset regime on 25 October 2027, which is intended to create an "open, sustainable, competitive and innovative digital asset sector".
In February, the introduction of Financial Services and Markets Act 2000 (FSMA 2000) (Cryptoassets) Regulations 2026 (Cryptoasset Regulations) significantly broadened the FCA's regulatory scope to include the issuance of qualifying stablecoins, the safeguarding of qualifying cryptoassets and specified investment cryptoassets, the operation of qualifying cryptoasset trading platforms (QCATPs), as well as intermediation services and staking activities. UK-based entities engaging in such activities will require FCA authorisation, as will overseas firms serving UK customers.
In light of the gateway opening, the following explores how firms can prepare for authorisation and highlights the key features of the regime, including the new conduct and prudential requirements.
Cryptoasset perimeter guidance (almost) finalised
In September the FCA published its perimeter guidance on cryptoassets following consultation. Firms seeking to provide cryptoasset-related services in the UK are encouraged to take a substance over form approach to their activities and not rely on labels commonly used in the cryptoasset market. Any assessment the FCA undertakes is activity-specific and fact-dependent, and the key questions firms must consider are:
- Is it carrying on a regulated cryptoasset activity?
- Is the activity carried on, or deemed to be carried on, in the UK?
- Is it carried on by way of business?
- Does an exclusion or an exemption apply?
Overseas firms should be aware that any regulated cryptoasset activities they carry out in the UK will likely fall within the UK perimeter and the Overseas Persons Exclusion is unavailable for regulated cryptoasset activities. Additionally, "reverse solicitation" is not an automatic exclusion, and the use of a branch or subsidiary structure does not determine the outcome.
Notably, the FCA defines a "qualifying cryptoasset" as fungible, transferable and not solely a record of value or contractual rights. E-money, currency, central bank digital currencies and specified investment cryptoassets are excluded from this definition. Meanwhile, "Qualifying stablecoins" are defined as cryptoassets that maintain their value with reference to a fiat currency and are backed by fiat currency or other assets. It is essential that firms assess the distinctions between qualifying cryptoassets, stablecoins and specified investment cryptoassets to accurately identify the relevant regulated activities that may apply.
Updated guidance is expected to be published in early 2027 following the Government's amendments to the Cryptoasset Regulations on 15 September in the form of FSMA 2000 (Cryptoassets) (Miscellaneous Amendments) Regulations 2026. However, the FCA noted that the changes will not affect most firms, who should use the current guidance to prepare for authorisation.
Revised handbook
As part of the new regime, authorised firms are subject to new and existing Handbook rules that the FCA has adapted to apply to the cryptoasset sector. This includes application of the senior management, system and controls sourcebook, safeguarding and custody, operational resilience, conduct of business standards, ESG and additional financial crime rules.
Significantly, authorised firms carrying out business in the retail market must apply the Consumer Duty (the Duty), with limited exceptions. In its non-handbook guidance, the FCA sets out how key features of the Duty including acting in good faith, avoiding foreseeable harm and enabling customers to pursue their financial objectives should be applied to address specific crypto-market related consumer risks. These include market volatility and the complexity of cryptoasset products and services.
'CRYPTO' sourcebook
Within the Handbook, a new CRYPTO sourcebook is also being introduced containing bespoke cryptoasset rules. These include new regimes relating to admissions and disclosures, market abuse, intermediaries and QCATPs, record keeping and reporting, lending and borrowing and staking.
The new sourcebook will also contain rules relating to qualifying stablecoins. These measures are designed to strengthen the stability and transparency of stablecoins through requirements relating to backing assets, redemption process, disclosures and appropriate controls. Issuance of 'systemic' stablecoins (those which are widely used in payments and may pose risks to UK financial stability) will be jointly regulated by the Bank of England and FCA, with consultations on the application of rules to issuers recently ending.
New prudential regime
In PS26/12, the FCA introduced two new prudential sourcebooks which form the new prudential framework for authorised cryptoasset firms; COREPRU and CRYPTOPRU. The framework covers capital, liquidity, risk management and public disclosure requirements and is designed to be proportionate to the nature and scale of cryptoasset activities.
Firms already subject to UK prudential regimes will be familiar with the new framework as the FCA has tailored existing prudential requirements, including MIFIDPRU, to address crypto-specific risks.
Looking ahead
The authorisation process consists of application submission, review and feedback, assessment and interviews, and further feedback prior to receiving the outcome of the application. It is essential that firms begin planning immediately to be able to submit their application prior to the deadline of 28 February 2027.
Firms seeking authorisation must demonstrate that they are ready, willing, and organised throughout the authorisation process. This requires being open and transparent in all dealings with the FCA, having the necessary arrangements and supporting documentation in place to comply with the rules from the date authorisation is received, and evidencing that adequate preparation has been undertaken prior to submitting the application.
If you would like to discuss any aspect of the authorisation process or the regulatory regime, please get in touch with our team.
