Crypto firms operating in UK to be subject to sweeping new rules

The Financial Conduct Authority (FCA) has announced sweeping new rules for crypto firms operating in the UK, requiring them to hold capital against risky assets and conduct annual stress tests, with the regulations set to take effect in October next year [1]. The framework marks the first comprehensive regulatory regime for the crypto sector in the UK, covering trading, asset custody, consumer services, and risk management [1]. David Geale, the FCA’s executive director for payments and digital finance, said the rules apply the same core principles used across financial services. “For the first time, we’ve got a comprehensive regulatory framework for crypto in the UK, one that covers how firms trade, how they hold assets, serve consumers and manage risk,” Geale stated [1]. Under the new requirements, companies must build financial cushions to absorb losses and submit annual stress tests demonstrating resilience against major market shocks [1]. Unlike major banks, which receive specific scenarios from the Bank of England, crypto firms will design their own stress tests based on internal risk assessments and submit them to the FCA each year [1]. The regulator also reduced the capital required for certain crypto assets, such as stablecoins pegged to fiat currency, following industry pushback [1]. The FCA’s move comes amid broader efforts to tighten oversight of digital assets. Algorithmic trading, which a 2019 study found accounted for around 92% of Forex market activity, is also widely used in crypto markets, adding layers of complexity and speed that can amplify volatility [4]. The new UK rules aim to address risks in this environment. Geale said the regime directly targets consumer harm from unregulated activity. “This is really about giving crypto a solid foundation from which to build,” he added [1]. Dan Coatsworth, head of markets at investment platform AJ Bell, a FTSE 250-listed company, cautioned that regulation does not eliminate risk [1][5]. “Crypto has grown in popularity as a way for people to spread their wealth, but it has also become associated with get-rich-quick schemes and worryingly portrayed on social media as an easy way to make money,” Coatsworth said. “Regulation provides stronger consumer protection and helps to reduce scams, misleading promotions and losses from poor practices. It can reduce risk but doesn’t remove it completely.” [1] The FCA already oversees a range of financial firms, including online trading providers such as IG Group, a FTSE 100 constituent, and insurance brokers like Be Wiser Insurance [6][7]. The expansion into crypto supervision extends that regulatory perimeter to a sector that has faced minimal oversight despite a surge in popularity linked to social media influencers and a legitimisation drive under US President Donald Trump, who began his second term in January 2025 [1][2].