Crypto firms operating in the UK will be forced to prove they can weather market shocks and hold capital against risky assets as part of sweeping new rules announced by the Financial Conduct Authority (FCA). The regulations, which will come into force in October next year, increase supervision of an industry that has so far faced minimal oversight despite a boom in popularity linked to social media influencers and a legitimisation drive under the US president, Donald Trump.
David Geale, the FCA’s executive director in charge of payments and digital finance, said: “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.” He added that the package “applies the same core principles we use across financial services. So where we see the same risk … we’re looking for the same regulatory outcomes.”
“UK crypto firms must prove resilience to market shocks and hold capital against risky assets from October 2027.”
Among the requirements, firms must meet capital requirements – building a financial cushion to help absorb losses linked to risky assets on their balance sheets. They will also have to conduct annual stress tests showing they could withstand major market shocks and economic strain. However, crypto firms will be given the power to determine how much risk is on their balance sheet, which will dictate how much capital they need to hold. Unlike major UK banks, which are given specific scenarios by the Bank of England, crypto companies will conduct their own stress tests based on internal risk assessments, submitting them to the FCA each year.
The regulator has also cut the amount of capital required for some crypto assets – such as stablecoins pegged to fiat currency – following pushback from the industry. The new rules do not completely remove risks to consumers, who are still warned they can lose all their money if they choose to invest in crypto. But FCA bosses hope increased supervision will curb some of the bad behaviour and questionable business practices that have left people out of pocket.