- The FCA of the UK suggests relaxing 4 essential rules for crypto enterprises while emphasizing strong operational safeguards.
- The regulator references the $1.5 billion Bybit hack to advocate for enhanced cyber resilience regulations despite lighter principles.
- Crypto ownership in the UK reaches 12%; the FCA seeks feedback by November 12 on a revamped regulatory framework.
The UK’s financial regulator has revealed proposals that could transform how cryptocurrency businesses operate in the nation.
On Wednesday, the Financial Conduct Authority (FCA) announced that crypto firms might be exempt from adhering to four key principles usually imposed on financial service providers.
These rules generally ensure that companies operate with integrity, diligence, and in the best interests of their clients.
The FCA’s consultation is timely as Britain aims to solidify its stance in the global digital assets market, following its announcement in April to collaborate with the United States on a unified approach.
FCA proposes relaxing four foundational principles for the crypto sector
The FCA indicated it is contemplating the removal of four specific obligations for crypto trading platforms.
These involve requirements for firms to maintain integrity, act prudently, prioritize client interests, and ensure that any advice or discretionary actions taken for clients are appropriate.
While recognizing the volatility and risks associated with crypto assets, the proposed framework aims to help firms achieve consistent standards without hindering competition.
The regulator emphasized that these changes are intended to foster the growth of the UK’s crypto sector while still ensuring trust and market stability.
Simultaneously, it underscored that crypto assets carry high risks and consumer protection from unethical practices must remain a priority.
Stricter operational risk regulations following the $1.5 billion hack
Despite relaxing certain principles, the FCA is proposing more stringent measures regarding operational risk management.
This decision follows a February hack of $1.5 billion on the Dubai-based exchange Bybit, which the regulator cited as justification for “strong operational resilience controls.”
The FCA is urging firms to establish systems capable of withstanding cyberattacks and operational disruptions, which are becoming increasingly frequent as digital asset markets grow.
The consultation paper also probes whether customer access to the Financial Ombudsman Service should be extended to crypto asset firms, enabling client recourse for compensation in dispute situations.
Furthermore, it seeks opinions on whether the consumer duty—mandating firms to prioritize customer interests—should apply in this sector.
Rising cryptocurrency ownership in the UK
There has been a notable increase in cryptocurrency ownership in the UK in recent years.
Official data indicates that approximately 12% of adults have held or currently hold cryptocurrencies like Bitcoin or Ethereum, a significant rise from just 4% in 2021.
This swift rise highlights the necessity for a regulatory framework that ensures both consumer protection and industry growth in a competitive landscape.
The FCA requests feedback on its proposals by November 12.
Finalized regulations are expected to shape how the UK balances consumer protection with the goal of nurturing a sustainable and competitive digital asset industry.
