UK Cryptoasset Regime: What to Know About the FCA Consultation Papers

The 12 February 2026 deadline for firms to respond to the FCA’s consultation papers (CPs) on the future UK regulatory regime for cryptoassets is fast approaching. The FCA issued the CPs on the future UK regulatory regime for cryptoassets on 16 December 2025. They include: CP25/40 (detailed rules for regulated cryptoasset activities); CP25/41 (admissions, disclosures, and market abuse); and CP25/42 (the prudential regime for cryptoasset firms). A day earlier, on 15 December 2025, HM Treasury (HMT) published the final draft statutory instrument (SI) setting out the legislative framework underpinning the future UK regime (see this Latham report).

Although many of the proposed FCA rules correspond to existing traditional finance (TradFi) requirements, there are significant differences — particularly where the FCA has tailored the regime based on policy considerations and the specific nature of cryptoasset activity. As a result, the volume of rules being consulted on, combined with the limited time for firms to prepare for authorisation (see this Latham blog post), places significant pressure on firms seeking to engage with the proposals.

In this article, we outline key considerations for firms and industry groups regarding the CPs.

Key Considerations

CP25/40: Regulating Cryptoasset Activities

This CP sets out the FCA’s key rules governing cryptoasset activities, including proposals dealing with firms operating cryptoasset trading platforms (CATPs), acting as intermediaries (dealing as principal, as agent, or arranging), and providing cryptoasset lending, borrowing, and staking activities. As a result, the CP sets out some of the main market structure and conduct requirements applicable to cryptoasset trading services, and is likely to significantly impact the business models for firms seeking UK authorisation. Below are key issues raised by the CP.

Global Platforms and CATP Branch Structure

The FCA is moving forward with a branch‑based model that will enable UK consumers to access liquidity available on global platforms. However, although the FCA is consulting on its approach to international firms (see CP26/4), it has still not provided detailed guidance on the branch authorisation process or how this structure will function in practice.

Under the new regime, firms conducting certain cryptoasset-related activity and involved in the sale or subscription of a qualifying cryptoasset (QC) to UK consumers are deemed in scope of the regime, unless there is a UK authorised firm intermediating the transaction by dealing as principal or operating a CATP. For these purposes, a consumer is an individual in the UK acting for a purpose other than for any trade, business, or professional carried on by them.

By restricting the ability of a UK consumer to access an offshore venue directly, this approach creates a potentially significant barrier to enabling UK consumers to access offshore liquidity available on global platforms. The obvious alternative approach — establishing a separate UK authorised CATP to service UK consumers — could result in fragmentation of liquidity and worse pricing for UK consumers.

As a result, the FCA has proposed a branch model to enable international firms to service UK consumers. Under this model, an international firm would establish a UK authorised branch of its offshore trading venue — enabling the offshore platform to constitute a UK authorised CATP via establishment of a UK branch under the direct regulatory remit of the FCA. Since this would qualify as a UK authorised firm, UK consumers would be able to access the liquidity available on the international firm’s trading venue while still dealing directly with a UK authorised CATP in compliance with the UK regime.

However, although branch structures are common in the banking sector, this model is less familiar in a trading venue context, and there are significant uncertainties as to how it will operate in practice. In particular, there continues to be significant uncertainty in how the UK rulebook will apply to UK branches of international firms, and what impact seeking UK branch authorisation could have on a firm’s international operations.

Branch structures can give rise to conflicting regulatory requirements, given that they involve a single legal entity falling under the supervisory remit of both “home” and “host” state regulation. Although the FCA proposed a broad split between application of UK host and home state requirements in its previous discussion paper (see DP25/1), it has provided limited further guidance in subsequent consultation papers. Furthermore, the FCA has not provided detailed guidance on how it will treat applications for branch authorisation — instead noting that it will assess firms on a “case by case” basis — which potentially allows the FCA broad discretion in deciding which firms will be authorised to operate on this basis.

Although the FCA is consulting on additional guidance on its Approach to International Cryptoasset Firms (see CP26/4), the FCA’s guidance is high-level and provides limited information on how the FCA will treat branch authorisation applications. As a result, we anticipate that international firms will need to consider engagement with the regulator, including via the FCA’s Pre-Application Support Service (PASS), to the extent they seek to adopt the branch model.

Lack of Guidance on Territorial Scope

The UK regime takes a highly restrictive approach to servicing UK consumers from offshore. Additionally, although it appears clear from the FCA consultation papers and HMT publications that both the FCA and HMT view overseas services provided to institutional clients as not triggering FCA authorisation, the proposed regime does not include an express exemption for such activity or define what counts as an “institutional” client.

As a result, there remains a lack of clarity on the legal basis on which cryptoasset services can be provided cross-border to institutional clients without UK authorisation. Additional perimeter guidance from the FCA would therefore be welcome.

Best Execution and Order Execution

The FCA continues to implement best execution requirements broadly in line with TradFi requirements and the approach set out in DP25/1. Specifically, this approach requires cryptoasset intermediaries to take all sufficient steps to obtain the best possible results for their clients; such results are determined in terms of cost (or “total consideration”) for retail clients.

In addition, the proposed rules and guidance:

• clarify that a firm executing orders on behalf of a client when dealing as principal should be considered as undertaking execution of orders on behalf of clients and is subject to best execution requirements — raising the question of when a principal dealer would also be executing orders “on behalf of” a client beyond the case of matched principal dealing (MPT) activity;
• clarify that a firm executing orders should be able to include a single execution venue in its best execution policy, where it is able to show that this allows it to obtain best execution for its clients on a consistent basis — aligning with TradFi requirements. However, firms are required to check at least three reliable price sources from UK-authorised execution venues (though the FCA states in the consultation paper that this guidance is intended to operate as a general policy-level requirement rather than a per-transaction test);
• require intermediaries, when executing client orders or receiving and transmitting orders of UK retail and elective professional clients, to ensure that the orders are executed on UK authorised execution venues, including UK authorised CATPs and principal dealers; and
• restrict intermediaries, when dealing as principal and executing orders for UK retail and elective professional clients, from systematically or predominantly sourcing liquidity from an affiliated non-FCA authorised CATP (e.g., an offshore trading platform without FCA authorisation). This approach goes beyond the express position on cross-border order flow set out in the SI — and is likely to steer international firms towards adopting the proposed branch model to the extent they decide to continue servicing a mass market UK consumer client base.

The above requirements are likely to significantly restrict the ability of UK firms to transmit or execute client orders on offshore liquidity sources, raising questions as to whether UK clients — particularly retail and elective professional clients — will in practice receive worse pricing regardless of the formal requirement for firms to provide them with best execution.

Direct Retail Access to CATPs

The FCA states in CP25/40 that in cryptoasset markets retail investors have direct access to CATPs. In this context, the FCA has considered precedents from TradFi rules, particularly those applicable to multilateral trading facilities (MTFs) under UK MiFID. Interestingly, this includes transposing MTF membership criteria into the CATP section of the FCA Handbook (CRYPTO 6), notwithstanding that these MTF membership criteria are generally understood to restrict access to authorised firms and other sophisticated participants — and rule out a broad retail membership base. As a result, there is a degree of uncertainty as to how the FCA’s proposed membership criteria should be understood in a CATP context.

Principal Dealing Restrictions

The FCA has taken a more flexible approach to principal dealing compared with DP25/1, including allowing CATP operators to issue their own tokens and admit to trading tokens in which they arranged the issue or have a financial interest. In addition, CATP operators can execute matched orders on a matched principal basis and run a principal dealing desk in the same legal entity.

However, the CATP operator cannot otherwise execute orders against its proprietary capital or act as a market maker on a CATP that it operates. In addition, the order execution rules restrict principal dealers, when executing client orders, from systematically or predominantly sourcing liquidity from an affiliated non-FCA authorised CATP.

Cryptoasset Lending and Borrowing

The FCA has accepted industry feedback to DP25/1 by shifting from earlier restrictions on retail access to cryptoasset lending and borrowing services (L&B services) to allow retail access, provided strict safeguards are met, including requirements to:

• provide retail clients with the key terms of agreements relating to the L&B service (e.g., information on any restrictions, minimum thresholds and eligibility requirements, and information on cryptoasset and services provided);
• obtain express prior consent in relation to such key terms; and
• conduct appropriateness assessments.

Furthermore, the FCA noted in the recently published CP26/4 that L&B services have specific risks and that these should be factored into appropriateness assessments, or conducted separately to the general cryptoasset appropriateness testing.

The FCA has also introduced a ban on the use of proprietary tokens in L&B services (e.g., collateral, loaned assets, or yield payments) due to potential conflicts and manipulation risks.

As for borrowing specifically, the FCA has abandoned the initial proposal to require firms to comply with elements of the Consumer Credit Sourcebook, such as the requirement to conduct creditworthiness assessments. In the absence of such assessments, the FCA mandates that retail clients over-collateralise their loans to address the credit risk to the firm.

However, to protect retail clients from significant losses (e.g., which arise from fluctuations in the value of their collateral), firms must apply negative balance protection such that where firms do not recoup the loaned cryptoassets plus fees and charges through eligible collateral, the losses are absorbed by the firm.

CP25/41: Admissions, Disclosures, and Market Abuse for Cryptoassets

This CP sets out the FCA’s proposals for an Admissions & Disclosures (A&D) regime and a Market Abuse Regime for Cryptoassets (MARC), thereby establishing a market abuse framework for cryptoassets that is broadly in line with that in place for TradFi, with certain features specific to its application to cryptoassets.

Disclosure Documents

The FCA is proposing that CATPs be required to file “qualifying cryptoasset disclosure documents” (QCDDs) and “supplementary disclosure documents” (SDDs) with an FCA-owned centralised repository, such as the National Storage Mechanism (NSM), before trading starts, and publish approved QCDDs and SDDs on their own websites. The FCA has not mandated for QCDDs and SDDs to be in a specific machine-readable format.

In addition to filing and publication obligations, the FCA’s proposed rules in CRYPTO 3.6 sets out who is responsible for (preparing) the QCDD in different scenarios (noting that these rules do not apply to a QCDD produced in relation to a UK qualifying stablecoin). In summary:

• persons seeking admission to trading of a QC would prepare the QCDD or SDD. If such persons utilise a third party to prepare the QCDD or SDD, they still remain responsible for the document;
• an authorised CATP operator may admit a QC and prepare a QCDD. Here, the CATP is responsible for the document. The scenario could be relevant, for example, where there is no identifiable issuer (e.g., Bitcoin);
• each person who accepts and is stated in the disclosure document as accepting responsibility for it. This scenario could be relevant, for example, where intermediaries offering QCs to consumers prepare a QCDD and have responsibility for the document.

CATPs are required to establish risk-based and objective admissions criteria for assessing whether admission of a QC is likely to be detrimental to retail investors, and — as part of the admissions process — must conduct diligence on QCs. As part of this, the FCA requires CATPs to review the QCDD before admission and must not admit a QC unless they are reasonably satisfied that, for example, the QCDD includes the mandated content requirements and that the CATP’s own disclosure requirements and the information in the QCDD (e.g., identity of the key persons associated with the offer and admission, purpose and functionality of the qualifying cryptoasset, tokenomics and supply structure and lock-up arrangements, project roadmap and development status, risk disclosures) are true and not misleading.

Where a CATP cannot verify the information (and assuming the unverifiable information does not mean the admission of the QC is likely to be detrimental to retail investors), the CATP may proceed with the admission provided they report on any unverifiable information to the persons producing the QCDD in order for appropriate disclosures to be included in the QCDD.

The introduction of the limitation report is a welcome departure from prior proposals in DP24/4, which suggested that CATPs should be required to disclose in QCDDs a summary of the scope and key due diligence findings conducted. Market participants suggested such proposals could expose CATPs to legal and commercial risks and that they represented a potentially onerous standard where certain information was unverifiable by the CATP.

Notably, where a new/further QCDD is not required because the cryptoasset is fungible with one admitted under a compliant QCDD, the due diligence requirement to assess whether admitting the cryptoasset is likely to be detrimental to retail investors still applies.

Market Abuse Regime

MARC will apply to the use and disclosure of information and market manipulation. There are several crypto-specific features, such as safe harbours for “legitimate market practices”, including coin burning, crypto-stabilisation, and market making, and the imposition of requirements on issuers, offerors, and CATPs to control access to, and the disclosure of, sensitive information.

The FCA’s incorporation of features of the market abuse regime specific to cryptoassets is arguably an improvement on the approach taken pursuant to the Markets in Crypto-Assets Regulation (MiCA) in the EU, which was subject to commentary for following the TradFi market abuse regime without a sufficient framework for accepted market practices (including practices such as crypto buy-back programs and stabilisation), leading to potential regulatory uncertainty.

The FCA’s rules and guidance for the market abuse systems and controls of CATPs and intermediaries are set out in CRYPTO 4.7 and CRYPTO 4.8. Specifically, CATPs and intermediaries will be required to implement controls to carry out surveillance of orders and transactions, in respect of suspicious orders notifications, and preventing and/or disrupting market abuse activity. The systems and controls requirements should be applied proportionately. For example, additional requirements will apply to “large CATPs” (with greater than or equal to £10 million annual average revenue over the previous three years), such as the requirement to participate in cross-platform information sharing.

CP25/42: A Prudential Regime for Cryptoasset Firms

In this CP, the FCA builds on its earlier cryptoasset prudential consultation (see CP25/15) to extend prudential regulation to additional cryptoasset activities (including operating a CATP, staking, arranging deals, dealing as agent, and dealing as principal in QCs) and introduces further prudential requirements in relation to cryptoasset firms more generally.

At a high level, the FCA proposes an own funds requirement (OFR) for cryptoasset firms as the minimum amount of funds that a firm must maintain at all times, set as the highest of three limbs: the permanent minimum requirement (PMR), the fixed overhead requirement (FOR), and the K‑factor requirement (KFR).

In addition, the FCA is proposing a MiFID-adjacent prudential risk assessment requirement, similar to the internal capital adequacy and risk assessment (ICARA) applicable to MiFID firms and set out in MIFIDPRU. Finally, the FCA is proposing a tailored public disclosure regime for cryptoasset firms regarding their prudential position and risk management practices. Generally, these disclosures are expected to be made on a firm’s website and updated on an annual basis. Below are key issues raised by the CP.

Divergence From EU Approach Under MiCA

The cryptoasset prudential regime is aligned with MIFIDPRU, including activity- and exposure-based K-factors that firms must calculate. This is a key difference to MiCA, which includes a simpler prudential calculation based on activity type and quarterly fixed overheads only, rather than mirroring the MiFID prudential regime.

The CP also clarifies how certain elements of the cryptoasset prudential regime will interact with MIFIDPRU, in cases where firms are subject to both MIFIDPRU (for MiFID business) and COREPRU/CRYPTOPRU (for cryptoasset business). Helpfully, firms will only need to complete one overall risk assessment encompassing both cryptoasset and MiFID business, and while disclosure requirements must be met across both regimes, firms may publish one consolidated set of prudential disclosures that covers all requirements under each regime. The FCA plans to consult on amending its rules for investment firm groups to accommodate the potential presence of cryptoasset firms in such groups at a later date.

Prudential Requirements Applicable to Cryptoasset Exposures

As part of K-NCP (for firms that hold positions in QCs in their own name, including when executing client orders), cryptoassets are subject to different risk adjustments depending on whether they are classified as Category A or Category B cryptoassets. Firms are required to determine the appropriate category for a cryptoasset based on prescribed factors (e.g., where traded, operational history, level of market activity, and volatility).

Category A cryptoassets are characterised by higher levels of market maturity, liquidity, and resilience, and are subject to risk adjustments of 40% of net exposure value. As consulted, only cryptoassets traded on UK CATPs would qualify as Category A cryptoassets. Category B cryptoassets are subject to significant risk adjustments of 100% of net exposure value, meaning a firm’s K-factor would need to reflect 100% of its exposure to such cryptoassets, and therefore large exposures to such cryptoassets could have a material impact on a firm’s prudential requirement.

Similar risk adjustments apply in relation to K-CCD (counterparty default risks), which apply to firms that regularly enter into transactions involving QCs which expose them to counterparty default risk that lasts longer than the standard settlement period for a spot trade, with the added consideration that UK authorised qualifying stablecoins are subject to a 0% risk adjustment. Therefore, prudential requirements could vary significantly where a firm is performing retail lending and/or taking collateral in Category B cryptoassets compared with UK-authorised stablecoins.

Disclosure of Detailed Financial Information

The public disclosure regime may require the disclosure of detailed financial information. In particular, an enhanced disclosure regime applies where a firm is dealing in QCs as principal, with financial information required in relation to a firm’s ultimate parent undertaking. The FCA is also proposing that where a cryptoasset firm is a member of a group, it must disclose certain information of its membership of the group, including (i) the name, jurisdiction, and principal place of business of its ultimate parent and any intermediate parent undertakings, and (ii) any direct or indirect financial exposures to other group members (e.g., trading activity/intragroup lending/guarantees between firms, reliance on group members for revenue generation, and expectations that cash or dividends will be distributed upstream to meet financial liabilities incurred by other group members.

Follow Latham’s UK Cryptoasset Regulatory Tracker for up-to-date information, analysis, and source links to help cryptoasset businesses understand and respond to the latest regulatory developments.

This article was prepared with the assistance of Shamona Koshy in the London office of Latham & Watkins.