The FCA is inviting crypto firms to help shape the UK’s final rules for cryptoasset activities before regulations are enforced next year, including guidance for issuing stablecoins, operating trading platforms, and cryptoasset lending and custody.

With crypto companies able to apply for authorisation from September, the regulator has opened a consultation with the industry, closing on 3rd June, to clarify exactly which activities fall within its scope and which firms will need authorisation once the rules are enforced in October 2027.

While parliament has already confirmed which crypto activities will fall within the scope of regulation, the FCA said that the consultation and feedback will help both it and firms understand how the future regime will work. 

The regulator’s proposed framework lays out exactly who would be responsible for and authorised to carry out specific crypto activities in the UK. 

For instance, under the rules, while issuing qualifying stablecoins is a regulated activity, firms must create the coin and perform all three “limbs” from a UK base, including selling, redeeming, and holding backing assets.

Carrying out just one part of the process would not be considered issuance under the law, and neither would offering only tech or minting services, provided the firm isn’t arranging the remaining elements. 

The guidelines also set out what crypto exchanges will require approval, with the FCA clarifying that to count as a cryptoasset trading platform, services must be the “middleman” that actually makes a trade happen by connecting parties and executing the deal. 

However, qualifying exchanges will need a bundle of separate permissions for each of the roles they carry out, covering operating a crypto platform, safeguarding assets, and trading.

The FCA hopes that its exhaustive legislative framework will provide a clearer view of firms’ position within the UK’s burgeoning crypto market by reducing legal uncertainty and boosting fair competition. 

It is also aimed at ensuring crypto consumers are protected as the industry grows by ensuring those offering cryptoasset services are kept in check, with the FCA warning that, until the new regime comes into force, crypto is “largely unregulated”. 

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“While some may be tempted to roll their eyes at yet another consultation paper, this is another hugely positive step forward for the industry,” said Nick Jones, founder and CEO of Edinburgh-based Zumo, the digital assets and blockchain-as-a-service platform.

“This will enable proactive firms to prepare early for the new regime, and it’s fair to say that thanks to the FCA’s crypto roadmap, the UK is benefitting from a more systemic, phased, and predictable process than has been seen in many other jurisdictions.”

“What’s now required is the creation of compliant infrastructure that can accommodate new levels of operating obligations and act as a credible bridge to the UK market – and that’s where our current focus lies.”