UK’s FCA sets out stricter crypto rules in CP26/4 proposal

The UK’s Financial Conduct Authority has published Consultation Paper CP26/4, which outlines how its regulatory handbook will apply to firms carrying out newly regulated cryptoasset activities. The proposals outline standards of conduct, consumer protections, rules on safeguarding, and expectations for international firms looking to access the UK market.

Under CP26/4, the FCA has proposed that the Consumer Duty be applied to crypto firms in the same way as it is for other authorized firms. As a result, firms that serve retail customers would have to show fair value, transparent disclosures, and effective consumer support. However, the Duty would not apply to trading between participants on a UK authorized qualifying cryptoasset trading platform.

The FCA’s draft guidance outlines who qualifies as a product manufacturer in crypto markets. Issuers of qualifying cryptoassets or stablecoins, crypto lending and borrowing platforms, and UK trading platforms would be included in that category.

Complaints, ombudsman oversight, and limits on compensation

CP26/4 confirms that crypto firms would be subject to the standard complaint-handling rules of the FCA. Formal procedures and strict response timelines would be in place, bringing crypto firms into line with established financial services practices.

The proposals would also include crypto activities under the Financial Ombudsman Service. The ombudsman would be able to issue binding awards of up to GBP350,000, providing the consumer with redress that many crypto firms have not yet offered. At the same time, the regulator does not intend to extend the Financial Services Compensation Scheme to crypto activities. Customers would not be compensated for investment losses if a crypto firm fails.

Safeguarding, reporting, and a higher bar for global firms

The consultation also alters the way client cryptoassets must be protected. Firms that deal, operate trading platforms, issue stablecoins, or provide custody could be subject to the FCA’s client asset rules. Client money would be segregated and protected under a statutory trust, similar to traditional finance requirements.

Notably, the FCA has proposed to apply its new regime of safeguarding to both qualifying cryptoassets and security tokens. Training and competence standards would also apply to retail clients for staff, although no mandatory qualifications are envisaged.

For governance, CP26/4 includes thresholds for increased supervision under the Senior Manager and Certification Regime. Large stablecoin issuers and custodians holding assets above certain levels would have increased compliance requirements.

International firms are subject to clearer location expectations. The FCA proposes that most firms serving UK clients operate through a UK legal entity. Limited flexibility may be required for trading platforms that need access to global liquidity, but the overall approach is tighter than for non-crypto firms. The consultation also points out that the Prudential Regulation Authority can take similar expectations of systemic stablecoin issuers.

In addition, the FCA has also opened a consultation on CP26/4 until 12 March 2026. Final rules are anticipated later in 2026, with an authorization gateway in September 2026 and the regime coming into force in October 2027.