UK Cryptoassets and Digital Markets Developments: FCA publishes final rules on cryptoassets regulatory regime; Digital Markets Champion First Report published

The UK is fast progressing towards its final and rolled-out cryptoasset regulatory regime, ahead of authorisation application windows opening in September 2026. There is also a significant policy focus on establishing clarity around the broader enterprise environment in the UK for wholesale and retail digital asset activity, as well as the frameworks for the roll-out of blockchain technology deployment in the broader financial services industry.

Regulatory frameworks: Updates

The Financial Services and Markets Act 2000 (Cryptoassets) Regulations 2006 (the Cryptoassets Regulations), passed by the UK Parliament on 4 February 2026, significantly widened the FCA’s regulatory remit over a broad range of cryptoasset activities, going far beyond the AML and financial promotion standards that are already in scope.

A significant package of the UK’s Cryptoasset Roadmap has now been published by the FCA. Having consulted extensively over the past three years in four discussion papers and ten consultation papers, the FCA published policy statements and final rules on 30 June 2026 covering:

• Admissions and Disclosures and Market Abuse Regime for Cryptoassets (PS26/9 – applicable to firms Issuing, admitting or trading cryptoassets.
• Stablecoin issuance (PS26/10) – applicable to Stablecoin Issuers and Custodians.
• Regulated cryptoasset activities (PS26/11) – applicable to firms providing Cryptoasset Services (trading, dealing, custody, staking or lending and borrowing).
• Prudential regime for cryptoasset firms (PS26/12) – applicable to all cryptoasset firms.
• Application of the FCA Handbook for Regulated Cryptoasset Activities (PS26/13),– applicable to all cryptoasset firms.
  • The FCA has also published finalised guidance on: Application of the Consumer Duty to Cryptoasset Firms (FG26/5); Cryptoasset operational resilience (FG26/6); and Approach to international cryptoasset firms (FG26/7).

The FCA is largely implementing its proposals in each of these areas. It has made targeted amendments to improve clarity and proportionality.

International and cross-border business

International firms should note that the FCA’s baseline expectation is that firms carrying out regulated cryptoasset activities in the UK will need to do so from a UK legal entity. The FCA may allow a qualifying cryptoasset trading platform (QCATP) operator to serve UK customers via a UK branch, but in such cases, the FCA expects there to be a comparable level of regulatory protection and regulatory requirements in place in the firm’s home state.

The FCA also noted, in response to feedback to PS26/13, that the Senior Managers & Certification Regime (SM&CR) wouldn’t work well for international management structures where individuals overseas are allocated key senior responsibilities, and that its general expectation is that the “mind and management” of a UK authorised cryptoasset firm needs to be located in the UK. In particular, people holding the Compliance function (SMF16) and Money Laundering Reporting Officer (SMF17) should be located and work from the firm’s principal place of business in the UK.

Key next steps

• The Cryptoassets Framework will come into force on 25 October 2027.
• Firms that wish to carry on the new regulated activities will need FCA authorisation or, if already authorised, a variation of permission.
  • The FCA expects the application window to run from 30 September 2026 to 28 February 2027.
  • Firms that apply before commencement can continue providing cryptoasset services until their application has been finally determined by the FCA.
  • Firms that don’t apply before commencement will need to run off UK business before the regime starts.
• Firms seeking authorisation to undertake the new cryptoasset regulated activities should refer to the FCA’s information about the authorisation application form for cryptoasset firms.
• The FCA is expected to publish its final guidance on the scope of the new regulated activities and when permissions will be required in September 2026
• The FCA has also published consultations on non-Handbook guidance on CRYPTOPRU 7: Overall risk assessment for CRYPTOPRU firms (GC26/5) and on COREPRU 7: Overall risk assessment (GC26/4). The FCA plans to publish the non-handbook guidance by 30 September 2026.

Markets priorities: Digital Markets Champion

In relation to the tokenisation of financial markets more broadly, the Wholesale Digital Markets Champion – First Report has been published. It outlines the case for UK leadership in tokenised wholesale financial markets system and highlights priority policy areas where action should be taken.

This report provides insight into the opportunity of tokenisation in wholesale financial markets in the UK and the relevant steps the Wholesale Digital Markets Champion intends to take to support the UK’s position in the global financial landscape in the near future.

Index

• Admissions and Disclosures and Market Abuse Regime for Cryptoassets (PS26/9), see here
• Stablecoin issuance (PS26/10), see here
• Regulated cryptoasset activities (PS26/11), see here
• Prudential regime for cryptoasset firms (PS26/12), see here
• Application of the FCA Handbook for Regulated Cryptoasset Activities (PS26/13), see here
• Wholesale Digital Markets Champion – First Report, see here

 

Admissions and Disclosures (A&D) and Market Abuse Regime for Cryptoassets (MARC) (PS26/9)

Who is affected?

The Cryptoassets Regulations designated the public offer of qualifying cryptoassets and admissions to trading on a qualifying cryptoasset trading platform (UK QCATPs) as designated activities for the purposes of FSMA.

The A&D rules will apply to admission to trading of qualifying cryptoassets on UK QCATPs that allow retail participation – a “retail UK QCATP”; public offers that are made in accordance with one of the exceptions in the Cryptoassets Regulations; and admission to trading advertisements.

What has changed?

The FCA is broadly maintaining the approach proposed in the consultation, with targeted changes intended to improve proportionality, clarity and operational effectiveness.

The new regime is designed to improve market integrity, enhance transparency and strengthen consumer protection in UK cryptoasset markets.

What do the final rules require?

A&D

The A&D rules introduce a gatekeeper role for UK cryptoasset trading platforms (UK QCATPs), requiring them to:

• Establish risk-based and objective criteria for assessing whether a proposed admission to trading is likely to be detrimental to the interests of retail investors in accordance with the “retail investor detriment test” in CRYPTO 3.2. The FCA has made targeted changes and clarifications. In particular, the FCA has clarified that the criteria should be based on the potential risks to the interests of retail investors, how UK QCATPs should take into account information that cannot be obtained or verified when applying those criteria, and how records should be kept where this affects the due diligence assessment. UK QCATPs will be required to publish their admission criteria.
• Carry out due diligence by reference to their admission criteria before admitting qualifying cryptoassets to trading.
  • The FCA clarified that due diligence should be proportionate, risk-based and objective and that the framework is not intended to require UK QCATPs to guarantee the future performance of a qualifying cryptoasset or that retail investors will not suffer losses.
  • The FCA also clarified that the due diligence verification requirements require UK QCATPs to take reasonable steps and admission may still be possible where some information cannot be verified; UK QCATPs are not required to eliminate all uncertainty.
• Ensure investors have access to key disclosure information.
  • A retail UK QCATP operator may only admit a qualifying cryptoasset to trading if it has published a qualifying cryptoasset disclosure document (QCDD) on its website, uploaded to the FCA-owned centralised repository, and it is reasonably satisfied (before publication/upload) that the QCDD contains the minimum required information and complies with regulatory requirements relating to the presentation and content of QCDDs.
  • The FCA removed the proposed “fungibility” exemption, which would have allowed certain cryptoassets to be admitted without a new disclosure document where they were considered equivalent to an asset already admitted to trading. The FCA concluded that the exemption could create inconsistency and weaken investor protection.
  • In response to requests for further guidance, the FCA has added guidance to clarify when a supplementary disclosure document (SDD) would be required, for example, when the person who has produced the QCDD becomes aware of new information or a mistake or an inaccuracy that may be “material” to a person considering buying or subscribing for the qualifying cryptoasset. However, the FCA declined to provide a prescriptive or granular disclosure framework for QCDDs or SDDs.
• What firms should do next

The FCA intends to consult in September 2026 on a proposed six-month transitional deferral for the application of certain Admissions and Disclosures cryptoassets already in circulation.

MARC

MARC introduces a tailored market abuse framework prohibiting insider dealing, unlawful disclosure of inside information and market manipulation, with trading platforms and intermediaries playing a central role in monitoring and addressing risks.

The MARC rules include requirements on:

• The public disclosure of inside information (and requirements that apply when public disclosure is legitimately delayed). The FCA has amended its rules to make clear that protecting the security of the issuer or token may constitute a legitimate reason for delayed disclosure, eg of code vulnerability.
• Legitimate market practices. Coin burning (where it is an automatic function of a protocol, or non-discretionary, and has been publicly disclosed), and crypto-stabilisation (for a limited time), are recognised as legitimate market practices. However, the FCA removed the proposed “legitimate reasons” exception as a legitimate market practice under MARC, citing concerns around uncertainty and inconsistent application and therefore creating a risk that some abusive behaviour would be allowed.
• Market abuse systems and controls for UK QCATPs and intermediaries. These include internal-facing controls (personal account dealing, information barriers, training and record-keeping) and controls over client activity to prevent and disrupt abusive client activities. The FCA has added a requirement for all UK QCATPs to monitor price dislocations for signs of market abuse. Large UK QCATPs have to monitor on-chain activities related to their operations, eg wallet interactions, token flows and transaction patterns. The FCA clarified that large UK QCATPs aren’t required to monitor the entire chain all of the time; but only need to monitor the on-chain activity of wallets that are linked to their platform.
• Insider lists. The FCA has removed references to wallet addresses from the insider list templates, recognising that wallet addresses may in some cases constitute sensitive information. Instead, firms’ systems and controls must include arrangements with employees to support investigations into whether that employee has complied with its internal controls or undertaken cryptoasset market abuse.
• Information sharing among UK QCATPs (apply to large UK OCATPs) to assist in preventing, detecting and disrupting cross-platform market abuse. The FCA declined to prescribe common data formats as the information shared is likely sensitive and important for firms to undertake their own assessments under data protection rules.

The FCA is also retaining the industry-led approach to market abuse monitoring, despite calls from some respondents for a more centralised FCA surveillance role. The FCA considers trading platforms and intermediaries best placed to identify and address abusive behaviour in real time. However, the FCA has modified its rules to require firms to notify the FCA of suspicious activity that the firm cannot deal with itself, in addition to notification of serious or repeated abuse.

 

Stablecoin issuance (PS26/10)

Who is affected?

The FCA’s rules on stablecoin apply to UK stablecoin issuers and aim to create a framework that allows firms to issue UK-issued qualifying stablecoins that can be trusted as money-like instruments while supporting consumer protection and market integrity.

The Treasury is responsible for recognising UK systemic stablecoin issuers as payment systems or service providers using digital settlement assets. Such stablecoin issuers will be jointly regulated by the FCA and the Bank of England. Non-systemic stablecoin issuers will be “solo-regulated” by the FCA.

What has changed and what do the final rules require?

In response to feedback, the FCA has made some refinements to improve clarity, operability and proportionality.

• Backing assets: Stablecoins must be backed on a one-to-one basis by eligible low-risk and liquid assets. Issuers must hold “core backing assets” in their backing pool, consisting of short-term deposits and short-term government debt instruments, and can hold expanded backing assets in the backing pool. This is subject to notification to the FCA and satisfaction of additional conditions, including maintaining a robust risk management framework and complying with the backing asset composition ratio (BACR).

The FCA is not making any changes to the range of permissible backing assets despite some respondents calling for an expanded range to include other high-quality and liquid instruments such as Low Volatility Net Asset Value MMFs. The FCA declined to do so, saying that such assets could increase the volatility of the backing asset pool and threaten the stability of the stablecoin issuer. The FCA also disagreed with concerns that the T+1 redemption requirement could limit the practical use of expanded backing assets.

The FCA agreed with feedback that the BACR calculation can be simplified and so it has removed the peak estimated daily redemption amount component and revised the frequency of BACR calculations to help ensure that the BACR continues to be aligned with the redemption needs of the stablecoin. The FCA said that it will monitor whether the BACR remains relevant and appropriate as the stablecoin industry grows.

Although the FCA acknowledged that allowing backing assets to be held in multiple currencies could provide additional benefits, eg greater competition and supporting global liquidity, the FCA decided that a UK-issued qualifying stablecoin should only be backed by assets in the denominated currency to avoid any destabilising FX risks.

The FCA also confirmed that backing assets must be held on a statutory trust for the benefit of tokenholders. The FCA considers this necessary to ring-fence backing assets from the issuer’s own assets and protect tokenholders in an insolvency scenario. Where an issuer has multiple stablecoin products, it must maintain separate backing pools and separate trusts for each product. The FCA has also confirmed that all minted stablecoins must be backed from the point at which they’re minted, including stablecoins held by the issuer itself.

• Third-party custodians to hold backing assets: A majority of respondents were unsupportive of the FCA’s proposal to require UK stablecoin issuers to appoint third-party custodians unconnected to their group to safeguard assets in the backing asset pool. In response, the FCA will allow issuers to use intragroup custodians where appropriate controls are in place, including applying a 20% limit on the value of the backing pool or where the firm can demonstrate that compliance with the 20% limit would be disproportionate.
• Record-keeping and reconciliations: The FCA has removed the requirement to require funds to be placed in unallocated backing fund accounts then transferred into backing funds accounts or the firm’s own account as the FCA. In a simplified process, firms will now have to place funds into backing funds accounts or invest them in relevant assets accounts, then remove any excess at the next reconciliation. The FCA will also allow firms to retain a limited excess of up to 5% of the relevant stablecoin pool’s value so that firms will need to transfer assets out of the pool on a less frequent basis, reducing operational complexity.
• Redemptions: Issuers must give holders the right to redeem stablecoins at par value. The FCA has retained its requirement that redemption must be completed by placing a payment order no later than the end of the next business day (T+1), subject to anti-money laundering checks. The FCA views redemption rights as fundamental to maintaining confidence in stablecoins as money-like instruments. The FCA has clarified that although it will still require issuers to have a contract in place with tokenholders that clearly states the conditions for redemption, the issuer’s obligations to redeem must pass effectively in law from one holder to the next. There is no need to have contracts directly with secondary market tokenholders.
• Disclosure obligations: Following feedback received and lessons learnt from the Stablecoins Sandbox Cohort on the need to allow for increased flexibility of disclosures, the FCA has clarified its policy proposals on:
  • Frequency and timing of disclosures. Backing asset information and the number of stablecoins in circulation must be updated at least every three months; other general disclosures must be updated if it becomes inaccurate or misleading.
  • Level of detail required for assets. Firms don’t need to break down backing asset information into individual assets or positions within each type.
  • Format.The FCA won’t prescribe a specific format or template for website disclosures.

The FCA has implemented its proposal to require an annual independent review of the accuracy of statements made in the previous 12 months regarding the 1:1 ratio between the UK-issued qualifying stablecoin backing asset pool and the stablecoin pool. The FCA did not consider that the alternative approaches suggested by respondents (on-chain verification or reliance on existing financial statements) as being able to provide the level of assurance required.

The FCA confirmed that it’s not taking forward additional disclosure measures, including extending the Protected Forward Looking Statements regime, additional AML/CFT disclosures, or disclosure of post-issuance monitoring findings.

• Other issues: The FCA has confirmed that:
  • Issuers cannot pass interest or income generated from backing assets to tokenholders.
  • Firms can pay rewards to tokenholders from their own account based on, for example, usage or transaction volumes; but must not pay interest or income from the backing asset pool to tokenholders.
  • Its final rules don’t prohibit third parties from paying rewards to their own customers from their own account.

 

Regulated cryptoasset activities (PS26/11)

Who is affected?

The rules apply to regulated cryptoasset activities apply to firms providing cryptoasset services, including trading, dealing, custody, staking or lending and borrowing.

What has changed?

The FCA is retaining the overall framework it proposed but made several important refinements in response to industry feedback, including in relation to:

• Pre-trade transparency. The FCA decided not to extend pre-trade transparency requirements to principal dealers, which mirrors the FCA’s updated approach in non-equity traditional finance. The pre-trade transparency requirements will only apply to Large UK QCATP operators; while post-trade transparency requirements will continue to apply to both.
• Best execution. The FCA clarified that firms should be checking prices from at least three reliable UK authorised execution venues but aren’t required to execute on those venues or undertake mechanical transaction-by-transaction checks if they maintain effective arrangements that are supported by periodic post-trade analysis that evidence compliance with best execution requirements. The FCA also clarified that its guidance is also not intended to prevent firms from additionally considering prices on non-UK qualifying cryptoasset execution venues if those venues are subject to equivalent standards as UK execution venues.
• Lending and borrowing. The FCA largely proceeded with its proposals to apply enhanced protections when lending and borrowing activities involve retail clients. These include appropriateness assessments, enhanced disclosure requirements, express client consent, mandatory over-collateralisation, restrictions on the treatment of collateral and negative balance protection. The FCA also confirmed that proprietary tokens cannot be used in retail lending and borrowing arrangements.
• Safeguarding. The FCA confirmed that client cryptoassets will generally need to be held under a trust structure under a dedicated custody model (CASS 17). However, the FCA isn’t proceeding with applying CASS 17 to custodians of relevant specified investment cryptoassets (RSIC) that provide multiple regulated cryptoasset services, eg custodial staking, QCATPs or intermediaries safeguarding client cryptoassets, cryptoasset borrowing firms safeguarding client cryptoassets as collateral – instead these firms will have to apply CASS 6 requirements. The FCA has introduced an additional exception to the trust rules – which will apply where a firm holds a back-up key on behalf of a client (either the owner or another safeguarding firm) but that client retains full control and can act independently. The FCA also increased the proposed settlement-float exemption for QCATPs from 1% to 2% of client assets in response to feedback that 1% would not be sufficient to address typical customer trading volumes.
• Retail access to cryptoassets. The FCA hasn’t deviated from its proposals. The FCA confirmed that an intermediary firm can only deal or arrange deals in qualifying cryptoassets (other than UK-issued qualifying stablecoins) for or with a retail client where the qualifying cryptoasset is available to be traded on a UK QCATP and admitted to trading on a retail UK QCATP; the QCDD has been made available; and the qualifying cryptoasset has not been withdrawn from trading on all UK QCATPs.
• DeFi. Rather than creating a separate regulatory regime for decentralised finance, the FCA confirmed that the rules will apply where there is an identifiable controlling person carrying on regulated cryptoasset activities. Further guidance on how decentralisation will be assessed in practice is expected later this year.

 

Prudential regime for cryptoasset firms (PS26/12)

Who is affected?

The prudential regime applies to all CRYPTOPRU firms, ie any firm with permission to carry on any CRYPTOPRU activity.

What has changed?

The FCA is largely maintaining the prudential framework it proposed but has made some targeted recalibrations and clarifications to improve proportionality and usability. In particular, the FCA is:

• Reducing the operational risk K-factor capital requirement for stablecoin issuance from 2% to 1%.
• Simplifying the market risk framework:
  • Cryptoassets that can be prudently valued and are admitted to a UK QCTP will be subject to a single 40% net risk position requirement for K-NCP and 40% volatility adjustment for counterparty credit default (K-CCD).
  • Cryptoassets that do not meet these conditions (ie those that cannot be prudently valued or are not admitted to a UK QCTP) are to be deducted from regulatory capital and subject to 100% volatility adjustment for K-CCD.
• Introducing greater proportionality in the public disclosure regime.

The prudential requirements are set out in the COREPRU and CRYPTOPRU sourcebooks and they apply to a CRYPTOPRU firm, ie a firm with permission to carry on any CRYPTOPRU activity.

The FCA confirmed that an MiFID investment firm that is also a CRYPTOPRU firm will have to comply with both regulatory capital regimes.

The FCA is consulting on non-Handbook guidance which is intended to support firms with their overall risk assessments.

What do the final rules require?

Own funds composition and proportion of capital tiers: The definition and composition of capital for CRYPTOPRU firm and deductions and prudential adjustments are broadly aligned with the existing rules in MIFIDPRU. Therefore, MiFID investment firms (and, to an extent, banks, authorised payment institutions and e-money issuers) should be broadly familiar with the overall prudential framework for CRYPTOPRU firms.

Capital resources:

• Respondents to the consultation suggested various amendments to create a more proportionate approach, such as allowing non-traditional, non-fiat investments to be used as capital resources, recognising insurance products for meeting capital requirements, and/or introducing transitional arrangements or simplified regime for smaller firms or startups.
• However, the FCA didn’t take these suggestions forward. The FCA considers it critical for firms to maintain a high-quality capital base, while leaving scope for firms to use new types of capital instruments as they emerge, provided they can demonstrate that the instrument meets the core requirements in COREPRU 3.

Deductions from CET1 capital: The FCA isn’t making any changes to the rules that it consulted on. The following assets are to be deducted from the firm’s CET1 capital:

• Intangible assets – such as:
  • Proprietary software, systems and other intellectual property. The FCA recognises that, while internally developed systems may be essential for generating revenue, their reliable value and ability to absorb losses are uncertain.
  • Qualifying cryptoassets classified as intangible assets under the relevant accounting standards. However, the FCA clarified that it doesn’t expect a firm’s holding of qualifying cryptoassets for sale in the ordinary course of business to be classified as intangible assets and so wouldn’t need to be deducted (instead, such holdings may be subject to capital requirements under relevant K-factors).
  • Qualifying cryptoassets that aren’t traded on a UK QCTP or held in the trading book that cannot be prudently valued.

• Cryptoassets that the firm issues or controls the supply of: the FCA stated that this approach is consistent with principles applied in traditional finance, which require firms to deduct holdings of their own CET1 instruments because they’re unlikely to truly absorb losses in a stress scenario. However, UK-issued qualifying stablecoins don’t need to be deducted.

• Deferred tax assets that rely on future profitability: the FCA said that this is consistent with other existing prudential regimes.

Own funds requirements: Similar to requirements in MIFIDPRU, the baseline requirement is the higher of the:

• Permanent Minimum Requirement (PMR);
• Fixed Overheads Requirement (FOR); and
• K-factor requirements (operational risk K-factors and exposure-based K-factors).

Most respondents (70%) were generally unsupportive of the FCA’s proposals. The FCA noted that many respondents raised concerns about the PMR, particularly for dealing as principal, arguing that it was too blunt, insufficiently risk-sensitive and “materially higher than comparable international regimes,” notably the EU’s MiCA regime, with potential implications for UK competitiveness.

The FCA’s response is that proportionality is already built into the PMR as it varies depending on activity undertaken. It also noted that the PMR for dealing as principal is set at the same level as for MiFID investment firms dealing as principal under MIFIDPRU, because the operational and risk management infrastructure required is no less demanding simply because the underlying instrument is a cryptoasset.

The FCA also considered comparisons with MiCA but concluded that MiCA doesn’t contain a directly equivalent activity, meaning there is no sound basis for a direct comparison.

The FCA included some clarificatory points in the policy statement regarding deductions from total expenditure when calculating FOR, including in relation to gas fees, global shared services, research and development, and foreign currency expenses. However, it concluded that amendments to the final rules and guidance were unnecessary.

K‑factors requirements – the variable component of own funds

• Operational risk K-factors

As noted above, the FCA has reduced the operational risk K-factor capital requirement for stablecoin issuance (K-SII) from 2% to 1%.

The FCA is otherwise implementing its other K-factor proposals with only minor amendments, including:

• amending the definition of “cryptoasset order” in K-COO, K-CTF and K-CCS to exclude orders involving only UK-issued qualifying stablecoins
• clarifying that K-CCO applies to the operator of a qualifying cryptoasset trading platform; and
• clarifying that, for client orders involving a qualifying cryptoasset and an MiFID financial instrument, the cryptoasset leg falls within K-COO, and the financial instrument leg falls within K-COH under MIFIDPRU. The same principle applies to transactions undertaken for a firm’s own account.

The FCA also responded to concerns about international competitiveness arising from differences between the FCA’s approach and the approach taken under MiCA, which does not use K-factors. The FCA recognises the difference in structure and noted that the UK may be the first major jurisdiction to apply prudential requirements to such a wide range of regulated cryptoasset activities. Accordingly, “headline capital comparisons across jurisdictions are not a like-for-like measure of competitiveness.”

The FCA’s approach is to recalibrate coefficients rather than redesigning the framework. The coefficients will remain in the final rules but will be kept under review.

• Exposure risk K-factors

Acknowledging the broad support for its approach to trading book positions, the FCA is largely proceeding with its proposals, with some clarifications, including:

• Firms shouldn’t record holdings of qualifying cryptoassets in the trading book where, for example, they’re held simply to pay operating expenses.
• Cross references to UK CRR have been removed for simplicity.

The FCA has revised the K-NCP framework to address concerns raised by respondents and to ensure that its approach to market risks arising from the often highly volatile changes in value of cryptoassets is proportionate and practical. As noted above, the FCA has simplified the market risk framework and stated that it will continue refining it as international standards develop and more data becomes available.

• Cryptoasset counterparty default requirement (K-CDD)

K-CDD applies to transactions that create counterparty risk beyond the standard spot settlement period, such as repurchase agreements or other cryptoasset lending and borrowing activities.

The FCA has moved away from defining standard settlement periods by reference to general market practice (as these are still evolving) to the specific period the firm uses in its own settlement practice to settle spot transactions.

Consistent with its policy on negative balance protection for retail clients, the FCA has not changed the retail client risk factor of 83.33% or the scalar of 1.2x. Firms would need to hold capital equivalent to the full exposure value, after accounting for the collateral received, when engaging in retail cryptoasset borrowing/lending activities with retail clients.

The FCA has, however, amended its proposals to reflect changes to volatility adjustments. For example, qualifying cryptoassets that are admitted to a UK QCATP, held in the trading book and capable of being prudently valued, will be subject to a single position risk adjustment of 40% under the K-NCP capital requirement.

For transactions involving cryptoassets and MiFID financial instruments, K-CDD will apply instead of K-TCD under MIFIDPRU.

Concentration risk – monitoring and control requirements: The FCA is implementing its proposals on concentration risk, having received broad support for its principles-based approach.

Liquid assets requirement: CRYPTOPRU firms will be required to comply with minimum liquidity standards that reflect their operating needs and support market confidence.

• The Basic Liquid Assets Requirement (BLAR) will apply to all firms. BLAR is calculated as one-third of the FOR plus 1.6% of client guarantees (with only formal financial guarantees included).
• The FCA declined suggestions to expand the list of core liquid assets to include trade receivables, physical gold and FX (beyond the matching proportion of overheads with haircuts).
• UK stablecoin issuers must also comply with the Issuer Liquid Asset Requirement (ILAR).The amount of liquid assets needed will depend on the issuer’s chosen asset mix. For example, issuers will have to hold more longer dated public debt because such assets present a greater risk of shortfall.
• The FCA isn’t introducing a specific minimum FX risk capital requirement for issuers. However, where FX risk is relevant to an issuer, they should assess the risk and any mitigating measures as part of their overall risk assessment.
• The FCA also confirmed that tokenised forms of core liquid assets may be used to satisfy the BLAR and/or ILAR, provided they carry identical legal rights and comparable underlying risks to their non-tokenised equivalents.
• Sterling denominated assets must be used to satisfy the BLAR and ILAR (where applicable).

Overall risk assessment: The FCA is proceeding with its proposal to require firms to undertake an overall risk assessment that’s embedded within the firms’ governance and risk management framework.

The risk assessment must be documented in an Overall Risk Assessment (ORA) explaining how the firm complies with the Overall Financial Adequacy Rule.

• However, the FCA isn’t prescribing specific stress-testing scenarios, recognising that the risks faced by firms will vary according to their business model, scale and operating environment. Firms must therefore design scenarios that are severe but plausible tailored to their own circumstances, using guidance in COREPRU 7 and CRYPTOPRU 7.
• Firms will also need to calibrate their overall risk assessments to the scale and nature of potential harm arising from their activities.
• The FCA clarified that where a CRYPTOPRU firm forms part of a group that includes a MIFIDPRU investment firm, the firm should refer to MIFIDPRU 7, rather than COREPRU 7 and CRYPTOPRU 7, in relation to group arrangements.
• The FCA also clarified that the concept of “material harm” is intended to capture harm that is significant in the context of the firm’s activities and the markets in which it operates.

Public disclosure: In response to feedback that public disclosure needed to be proportionate, the FCA has decided to:

• Remove the requirement for firms to publicly disclose their Own Funds Threshold Requirement (OFTR) and Liquid Asset Threshold Requirement (LATR); and
• Exempt firms whose own funds requirement is determined by the PMR from detailed disclosure requirements.

 

Application of the FCA Handbook for Regulated Cryptoasset Activities (PS26/13)

Who is affected?

These requirements apply to all firms conducting regulated cryptoasset activities.

What has changed?

The FCA has confirmed how key parts of the FCA Handbook will apply to firms continuing regulated cryptoasset activities. The FCA has largely implemented its proposals to require cryptoasset firms to comply with existing FCA Handbook requirements, with targeted amendments to improve clarity and proportionality.

What do the final rules require?

The FCA has:

• Excluded UK-issued qualifying stablecoins from the definition of restricted mass market investments which means that qualifying stablecoins would not be subject to additional marketing restrictions, including cooling-off periods and appropriateness requirements.
• Adjusted the enhanced threshold (now GBP20 billion in backing assets, calculated as a three‑year rolling average) in relation to SM&CR qualifying UK stablecoin issuers in light of the Bank of England’s latest proposals.
• Amended its Consumer Duty non-Handbook guidance to clarify territorial scope; the consumer outcomes of fair value, consumer support and consumer understanding; and the roles of distributors and manufacturers in the supply chain. The FCA also confirmed its proposal relating to the scope of the Consumer Duty, including confirming that the Duty would not apply to trading between participants of a UK QCATP or designated activities relating to public offers and admissions to trading of qualifying cryptoassets.
• Provided further clarity on operational resilience expectations under SYSC 15A, including a new example for firms arranging deals in qualifying cryptoassets. Given the risks posed by cryptoasset activities and the reliance on technology in providing essential activities, the FCA considered that it was appropriate and proportionate to impose SYSC 15A (operational resilience) on all cryptoasset firms. The FCA also confirmed that permissionless Distributed Ledger Technology will not be treated as outsourcing for SYSC 8 purposes, although firms will still need to manage associated operational resilience risks.
• Clarified its approach to international cryptoasset firms, so firms dual-regulated by the PRA and FCA may operate in the UK through a branch where the PRA (as the lead regulator) is satisfied that its threshold conditions and ongoing requirements are met. The FCA declined to provide further guidance on permissible structures for overseas operators as it considers queries from OCATP operators seeking authorisation via a UK branch (as opposed to a subsidiary) should be addressed on a case-by-case basis.
• Disapplied COBS (conduct of business requirements) to non-UK users of an overseas-incorporated QCATP authorised in the UK via a branch to prevent conflict with requirements imposed in home jurisdictions. The FCA said it expects this to be determined by the habitual residence of the user or (where applicable) having a UK place of business.
• Confirmed that the Financial Services Compensation Scheme (FSCS) protection would not be extended to regulated cryptoasset activities. However, eligible complainants (not including non-UK customers of overseas-incorporated QCATPs authorised via a UK branch) will still have access to FOS.

 

Wholesale Digital Markets Champion – First Report

Who is affected

The report is relevant to all participants in wholesale financial markets, including financial intermediaries, asset managers, and infrastructure providers.

What the report covers

HM Treasury published the first of two reports to the Chancellor from its Wholesale Digital Markets Champion, Christopher Woolard CBE, the Wholesale Digital Markets Champion – First Report. The aim of the report was to provide a framework towards how the UK develops a tokenised wholesale financial markets system and steps towards the sector’s implementation of the government’s Wholesale Financial Markets Digital Strategy. In the report, tokenisation is defined as the representation of assets using distributed ledger technology.

The report states that tokenised markets are crucial to the future of financial services and notes that tokenisation is an opportunity for the UK to improve efficiency, enhance innovation and preserve the UK’s competitiveness in established wholesale financial markets. The report highlights the scale of the opportunity of tokenisation, with some estimates putting the tokenised real-world assets market at USD88 trillion by 2035 which could translate into a GBP33 billion increase in annual economic output for the UK by the same year.

The report suggests that the early focus of developments in tokenisation should be on the UK’s strengths across fixed income, international Foreign Exchange, equities, derivatives and trusted financial intermediaries and advises that attention should be specifically directed to secondary markets as well as post-trade and settlement infrastructure.

Priority areas for action

The report outlines the immediate industry priorities and supporting actions for HM Treasury as well as the Bank of England, the Prudential Regulation Authority, and the Financial Conduct Authority (the Authorities). These priorities are:

• Clear direction towards scalable, live tokenised markets that drive industry investment
• Tokenised collateral to support the development of tokenised markets
• Establishing a tokenised funds market
• Wholesale payment rails that support tokenised markets
• Legal certainty and best practice to remove perceived and real obstacles
• Regulatory standards that support tokenised markets
• Standards that support domestic and international interoperability and convergence
• Effective Financial Crime Compliance (FCC) and digital identity
• A technology-neutral approach to tax
• Resilience through collaboration between industry and the Authorities

What firms should do next

The Digital Markets Champion Industry Taskforce will drive these priorities over the next 12 months with Action Groups being set up across multiple different areas to convene industry experts. The Wholesale Digital Markets Champion is welcoming further engagement and views on the contents of the report by Friday, 4 September 2026 to ensure the proposed programme of work reflects the priorities of the sector as a whole.